2017 (11) TMI 1182 - AT - Service Tax

Service of repairing of footwear - sale or service? - appellant claim is that they were paying VAT on the full amount of income so generated and that they have supplied the material wherever necessary to complete the repairing service - Department, however, took the view that the activity undertaken by the appellant was in the nature of service covered under the heading management, maintenance or repair service - Held that - such activity cannot be considered purely as sale of repair materials but is an activity covered under sec 65 (105) (zzzg) under the heading management, maintenance of repair service - demand upheld. Benefit of N/N. 12/2003 ST dated 1/3/2006 - the benefit is available only subject to satisfaction of conditions specified therein. One of the conditions is that the assessee should be in possession of documentary evidence indicating of value of goods/materials sold along with the provision of service. Further, no Cenvat Credit of duty in respect of such goods and materials should have been availed - Held that - the appellant has failed to substantiate that they have fulfilled these conditions. They have also not placed any evidence to justify the benefit of notification - benefit rightly denied. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Classification of activity as sale transaction or service under Service Tax law.
2. Applicability of Works Contract Service.
3. Eligibility for Notification No.12/2003-ST benefit.

Detailed Analysis:

Issue 1: Classification of activity as sale transaction or service under Service Tax law
The appellant contended that their activity of repairing footwear is essentially a sale of repaired materials, with fixing the material being incidental. They argued that since VAT was paid on the full consideration, no Service Tax should be demanded. Additionally, they suggested that if not considered a sale, the activity should be classified under Works Contract Service. However, the Department viewed the activity as a service falling under 'management, maintenance, or repair service.' The Adjudicating Authority examined invoices and concluded that the activity was indeed a repair service, not merely a sale of materials. The Tribunal upheld this view, stating that the activity fell under the Service Tax category, making the appellant liable for the demanded Service Tax.

Issue 2: Applicability of Works Contract Service
The appellant raised the argument that their activity could be classified under Works Contract Service, citing a Supreme Court judgment. However, upon review, the Tribunal found that the activity did not meet the definition of 'Works Contract' under the relevant law. Consequently, the Tribunal dismissed this argument put forth by the appellant.

Issue 3: Eligibility for Notification No.12/2003-ST benefit
The appellant claimed eligibility for the benefit of Notification No.12/2003-ST, which allowed exclusion of the value of material supplied while providing the service for calculating Service Tax. However, the Adjudicating Authority found that the appellant failed to satisfy the conditions specified in the notification, such as providing documentary evidence of material value and not availing Cenvat Credit. As a result, the Tribunal upheld the Authority's decision, ruling that the appellant was not entitled to the Notification's benefit.

In conclusion, the Tribunal upheld the impugned order, stating that the appellant's activity constituted a service under the Service Tax law, rejecting arguments related to Works Contract Service and Notification No.12/2003-ST benefit. The appeal was dismissed, affirming the liability of the appellant to pay the demanded Service Tax.