2018 (2) TMI 407 - AT - Service Tax

Valuation - includibility - amount recovered for repair/re-winding of the defective stators in their bills for repair of compressors - Held that - the appellants are not denying the use of the repaired stators for repair of compressors without which such repairing process is not completed As such the stator is an inputfor rendering the output service and therefore the cost of the input is to be added to the value of the taxable service. Extended period of limitation - Penalty u/s 78 - Held that - the dispute in the instant case regarding valuation was not a matter which should have created any doubt in the mind of the appellant - non-inclusion of said value was obviously with intent to evade payment of duty and thus imposition of penalty and invocation of extended period of limitation are justified. Appeal dismissed - decided against appellant.

Summary

Issues:
Appeal against demand of service tax and penalty under Section 77 & 78 of the Finance Act for repair of compressors including stators in taxable value of service.

Analysis:
The appellant, engaged in repair of compressors, argued that they replace and repair the stator during compressor repair, with rewinding charges recovered from the client separately. The appellant contended that the value of stator repair should not be included in the taxable value of compressor repair service. The revenue, however, insisted on including stator repair charges in the assessable value. The Tribunal noted that the stator repair is integral to compressor repair, as the repaired stators are used in the repair process, making it an input for the output service. The Tribunal agreed with the revenue's stance, upholding the inclusion of stator repair charges in the taxable value of the service.

The appellant also argued against the invocation of the extended period of limitation, claiming no malafide intention and citing previous audits without objections. However, the Tribunal found the non-inclusion of stator repair charges in the taxable value as an attempt to evade duty payment, justifying the penalty under Section 78 and the extended period of limitation. The Tribunal upheld the penalty and remanded certain issues for re-quantification, which were not challenged by the appellant.

In conclusion, the Tribunal upheld the impugned order, dismissing the appeals against the demand of service tax and penalty. The judgment emphasized the integral nature of stator repair in compressor service, leading to the inclusion of stator repair charges in the taxable value. The penalty under Section 78 was deemed justified due to the intent to evade duty payment. The decision was pronounced in court on 31/1/18.