2018 (8) TMI 27 - AT - Service Tax

Management, Maintenance and Repair Service - the cost of Television sets was fixed and appellants were required to provide two years free warranty to ELCOT - no consideration received for warranty service - Held that - The appellant has not received any consideration towards free service during the period of warranty of Two years after sale. As appellant has not received any amount towards services provided by them, therefore, no service tax is payable by the appellant - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Demand of Service Tax under 'Management, Maintenance and Repair Service'
2. Interpretation of agreement terms regarding warranty charges
3. Applicability of Service Tax on the amount retained by ELCOT

Analysis:
1. The appellant contested the demand of Service Tax confirmed under the category of 'Management, Maintenance and Repair Service' amounting to ?1,64,44,779. The Revenue argued that the amount retained by ELCOT pertained to services to be provided by the appellant, leading to the issuance of a Show Cause Notice and subsequent confirmation of the tax liability along with penalties and interest.

2. The appellant, a trader procuring Television sets for supply to the Tamil Nadu Government, had an agreement with M/s E-durables for procurement and supply to M/s ELCOT. The agreement included a provision for two years of free warranty on the Television sets, with ELCOT retaining ?150 per Television to ensure service within the warranty period. The appellant argued that this amount was part of the Television cost and not consideration for 'Management, Maintenance & Repair Services', as they were obligated to provide free service as per the agreement terms.

3. After hearing both parties and reviewing the case details, the Tribunal found that the price of the Televisions included charges for repair and management services to be provided during the warranty period. However, as the appellant did not receive any consideration specifically for the services provided, the Tribunal ruled that no Service Tax was payable. The impugned order demanding Service Tax was set aside, and the appeal was allowed with consequential relief, if any.

This judgment clarifies the distinction between consideration for services rendered and the cost of goods supplied under specific agreement terms, ultimately influencing the applicability of Service Tax on such transactions.