2018 (1) TMI 376 - AT - Service Tax

Club or association Service - supply of tangible goods - Held that - the issue is no more res-integra as there are no services provider-service recipient relationship between the club and the members as held in various juridical pronouncements - there could be no liability of Service Tax on the appellant under the category of Club or Association Service. Repair and Maintenance Service - repair of aircraft engine - Held that - the appellants received taxable service of repair and maintenance. The said service has been carried out and provided by M/s Honeywell partly in India and partly in France. M/s Honeywell used another sub-contractor on their own to render the part of repair service in India will bring the tax liability to the appellant in view of the proviso to Rule 3 (ii) of Taxation of Services Rules, 2006 - repair and maintenance service is liable to tax. Time limitation - penalties - Held that - the ingredients for invoking extended period could not be sustained in the present demand. There could be no malafide or misrepresentation attributable in such circumstances of the case - demand should be restricted to the normal period - the penalties imposed on the appellants are also not sustainable. Appeal allowed in part.

Summary

Issues:
1. Applicability of Service Tax under the category of Club or Association Services.
2. Tax liability under repair and maintenance service.
3. Contestation of demand on limitation.
4. Imposition of penalties.

Analysis:

Applicability of Service Tax under the category of Club or Association Services:
The appellant, an association of companies providing aircrafts to members, contested the Service Tax liability under Club or Association Services for the period 01/04/2006 to 16/05/2008. The appellant argued that there was no service provider-service recipient relationship between them and the members availing the aircraft services. The tribunal noted precedents and held that the appellant was not liable for Service Tax under the category of Club or Association Service. The tribunal emphasized that the appellant had been paying Service Tax under a different category post the introduction of such tax entry.

Tax liability under repair and maintenance service:
Regarding the tax liability under repair and maintenance service, the appellant contended that the repair work on aircraft engines was carried out partly in India and partly in France. The appellant argued that since they paid full consideration to a foreign company for the repair services, they should not be liable for Service Tax. However, the tribunal held that the repair activities, involving multiple acts, were performed partly in India, making the appellant liable for Service Tax under the Import of Service Rules, 2006. The tribunal disagreed with the Original Authority's reasoning and ruled in favor of imposing Service Tax on the appellant for repair and maintenance services.

Contestation of demand on limitation and Imposition of penalties:
The appellant contested the demand on limitation, stating that any Service Tax payable was fully creditable and that they had been compliant with tax regulations. The tribunal agreed with the appellant, ruling that the demand should be restricted to the normal period and that penalties imposed were not sustainable. Consequently, the tribunal partly allowed the appeal, setting aside the penalties imposed on the appellant.

In conclusion, the tribunal ruled in favor of the appellant regarding the Club or Association Services issue but upheld the tax liability under repair and maintenance services. The demand was restricted to the normal period, and penalties imposed were set aside based on the appellant's compliance and creditable tax payments.