2018 (5) TMI 1231 - AT - Service Tax

Valuation - management and maintenance or repair work - benefit of abatement under N/N. 12/2003-ST dated 20.06.2003 - benefit of the abatement stands denied for the non-compliance of the second condition of the Notification that there should be documentary proof specifically indicating the value of the said goods and materials sold during the course of service by the service provider to the recipient of the service. Held that - reliance placed in the case of Safety Retreading Company (P) Ltd. vs. Commissioner of C. Ex. Salem 2017 (1) TMI 1110 - SUPREME COURT where Apex Court has considered the practice in the industry of retreading of tyres wherein out of the total consideration charged for the retreading activity the value added tax is normally charged on the component of 70% of the consideration by the State Authorities. The Apex Court has held that similar dispensation can be given for the purpose of levy of Service Tax also and that such Service Tax be charged on 30% of the retreading charges. The claim of abatement in terms of the Notification 12/2003 is required to be re-considered in the light of the pronouncement of law on the subject by the Hon ble Supreme Court in the case of Safety Retreading - appeal allowed by way of remand.

Summary

Issues:
1. Dispute over the value for payment of Service Tax under the category of management and maintenance or repair work.
2. Benefit of abatement under Notification No.12/2003-ST.
3. Imposition of penalty under Section 77 and Section 78 of the Finance Act.

Analysis:

Issue 1: Dispute over the value for payment of Service Tax
The appellant, engaged in retreading of tires, filed an appeal against the Service Tax demand. The dispute revolved around the value to be adopted for payment of Service Tax under the category of management and maintenance or repair work. The appellant claimed the benefit of Notification No.12/2003-ST, subject to conditions. The impugned order denied the abatement under the said Notification and upheld the Service Tax demand along with the penalty under Section 77.

Issue 2: Benefit of abatement under Notification No.12/2003-ST
The appellant argued for the benefit of abatement under Notification No.12/2003-ST, citing judgments supporting their stance. The Department justified upholding the Service Tax demand, stating that necessary documentary evidence regarding the sale of materials was not produced by the assessee. The Tribunal noted that the benefit of abatement was denied due to non-compliance with the condition of providing documentary proof indicating the value of goods and materials sold during the service.

Issue 3: Imposition of penalty under Section 77 and Section 78
The Tribunal considered the arguments from both sides and perused the appeal record. It was observed that while no Cenvat Credit was availed by the assessee, the benefit of abatement was denied due to lack of documentary evidence. Referring to a Supreme Court judgment, the Tribunal set aside the impugned order and remanded the matter to the original authority for re-consideration in light of the Apex Court decision. The Tribunal directed the assessee to provide additional submissions, and the imposition of penalty under Section 78 was to be re-considered during the de-novo proceedings.

In conclusion, the Tribunal remanded the matters to the adjudicating authority for re-consideration, emphasizing the need to reassess the claim of abatement and the potential imposition of penalties under Section 78, based on the Supreme Court's decision in a similar case.