2018 (5) TMI 402 - AT - Service Tax

Whether the activity undertaken by M/s. Xerox for various contracts for Maintenance and Repairs do qualify as Maintenance or Repair Service, or not? - Held that - It is a fact that appellant is engaged in the activity of Maintenance and Repair of equipments supplied by them under various contracts. M/s. Xerox is required to replace the parts and accessories at the time of repair or maintenance - these are the Works Contracts and M/s. Xerox is paying VAT on the portion of materials supplied, therefore in the light of the decision in the case of Wipro GE Medical Systems Limited 2008 (8) TMI 207 - CESTAT, BANGALORE M/s. Xerox is liable to pay service tax only on Labour Portion. Whether the service namely, XGS shall qualify under Business Support Service or Business Auxiliary Service or under Works Contract service? - Held that - the appellant is engaged in the activity of printing of bill and not Billing . Therefore, the said printing of bill is altogether a different activity from the billing and cannot be termed as Billing - the services in question do not qualify under the category Business Auxiliary Service - appeal of Revenue dismissed. Whether the activity undertaken by M/s. Xerox are properly classifiable under Works Contract or not? - Held that - for the period prior to 01.06.2007, no demand is sustainable under the category of Maintenance and Repair Service/ Business Support Service/ Business Auxiliary Service for the activity undertaken by M/s. Xerox as the services of Business Support Service and Maintenance and Repair along with material and the agreement cannot vivisect the amount of material supplied by M/s. Xerox - The activities undertaken by M/s. Xerox under various contracts in question for Maintenance and Repair and XGS i.e. Business Support Service / Business Auxiliary Service do not qualify as taxable service under Works Contract service, under Section 65 (105) (zzzza) of Finance Act, 1994, during the period - M/s. Xerox is not liable to pay service tax under the category of Maintenance and Repair service/ Business Support Service / Business Auxiliary Service . Whether interest can be demanded and penalty can be imposed against M/s. Xerox? - Held that - As no demand is sustainable on M/s. Xerox therefore demand of interest and penalties are also set-aside. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
- Classification of Maintenance and Repair Services.
- Classification of Xerox Global Services (XGS) under 'Business Support Service', 'Business Auxiliary Service', or 'Works Contract Service'.
- Classification of activities under Works Contract.
- Liability for interest and penalties.

Issue-wise Detailed Analysis:

1. Classification of Maintenance and Repair Services:
The Tribunal examined whether the activities undertaken by M/s. Xerox for various contracts of Maintenance and Repairs qualify as Maintenance or Repair Service. It was noted that M/s. Xerox engaged in maintenance and repair activities, replacing parts and accessories. The Supreme Court had previously classified these contracts as Works Contracts, requiring payment of VAT/Sales Tax on the material portion. Following the decision in Wipro GE Medical Systems Limited, the Tribunal concluded that M/s. Xerox is liable to pay service tax only on the labor portion of these contracts, as VAT was already paid on the material portion.

2. Classification of Xerox Global Services (XGS):
The Tribunal considered whether XGS services should be classified under 'Business Support Service', 'Business Auxiliary Service', or 'Works Contract Service'. The Revenue argued for classification under 'Business Auxiliary Service', specifically under Clause (iv) related to billing. However, the Tribunal found that M/s. Xerox's activities involved printing bills, not billing itself. Citing the Andhra Pradesh High Court's decision in Phoenix IT Solutions Limited, the Tribunal held that printing bills does not qualify as 'Business Auxiliary Service'. Therefore, the services in question do not qualify under 'Business Auxiliary Service', and the Revenue's appeal on this ground was dismissed.

3. Classification under Works Contract:
The Tribunal examined whether the activities under various contracts of Maintenance and Repair Service and Business Support Service are properly classifiable under Works Contract. The Supreme Court's decision in Larsen & Toubro Limited was referenced, which held that services provided along with materials that cannot be vivisected should be classified as Works Contracts. The Tribunal concluded that prior to 01.06.2007, no demand is sustainable under Maintenance and Repair Service/Business Support Service/Business Auxiliary Service for activities undertaken by M/s. Xerox. Post 01.06.2007, the services provided did not fall under the definition of Works Contract Service as per Section 65 (105) (zzzza) of the Finance Act, 1994, and thus were not taxable.

4. Liability for Interest and Penalties:
Given that the Tribunal found no merit in the impugned order demanding service tax from M/s. Xerox under the categories of Maintenance and Repair Services/Business Support Service, it also set aside the demand for interest and penalties. As no demand was sustainable, the Tribunal allowed the appeal filed by M/s. Xerox and dismissed the appeal filed by Revenue.

Conclusion:
The Tribunal concluded that M/s. Xerox correctly discharged its service tax liability on the labor portion of Maintenance and Repair Services and under 'Business Support Service' for XGS. The activities were classified as Works Contracts, not subject to service tax prior to 01.06.2007. For the period post 01.06.2007, the services did not fall under the taxable category of Works Contract Service. Consequently, the Tribunal set aside the demands for service tax, interest, and penalties, allowing the appeal by M/s. Xerox and dismissing the Revenue's appeal.