2018 (2) TMI 1036 - AT - Service Tax

Valuation - Management, Maintenance and Repair service - case of the Revenue was that the appellant/assessee was required to pay the Service Tax on the total contracted value, including consumables and items used in the repair of the motors - Held that - The appellant/assessee has paid value added tax on goods used in the repairing process. The mere fact that the cost of the various items was shown for the purpose of price variation will not make any difference to the legal position. Reliance placed in the case of M/s JP TRANSFORMERS Versus COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, KANPUR 2014 (7) TMI 115 - CESTAT NEW DELHI , where it was held that on examination of the documentary evidences, we find that the agreements as also the invoices reflected the cost of the materials and the labour separately as also establishes the fact of payment of excise duty, VAT/CST on the said goods sold, it has to be held that no service tax would be leviable on the value of the materials sold. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of a contract for repair and maintenance services; Liability for Service Tax on total contracted value; Segregation of items in the contract for price variation; Payment of Service Tax on labor charges; Challenge on limitation; Application of Notification 12/2003-S.T.; Precedent from J. P. Transformers case.

Analysis:
The case revolved around the interpretation of a contract entered into by the appellant for repair and maintenance services of electric motors with thermal power stations. The Revenue contended that the contract was composite, requiring the appellant to pay Service Tax on the total contracted value, including consumables used in the repair. The Department alleged that the appellant failed to pay Service Tax on 80% of the billed amount and imposed penalties. The Original Authority upheld the demand, which was subsequently affirmed by the Appellate Authority.

The appellant argued that the contract clearly segregated the cost of each item and that Service Tax was paid on the service portion while VAT was paid on the value of goods separately. The appellant relied on Notification 12/2003-S.T., which exempts the value of goods sold by the service provider subject to documentary proof indicating the value. The agreement and invoices showed the value of goods used for repair separately, with VAT paid on them, supporting the appellant's position.

Moreover, the appellant contested the order on limitation and cited the decision in the J. P. Transformers case, which was upheld by the Allahabad High Court. The Tribunal, following the precedent set in the J. P. Transformers case, allowed the appeal, setting aside the impugned order and providing consequential relief to the appellant. As the appeal was allowed on merits, no finding was given on limitation, concluding the matter in favor of the appellant.