2018 (10) TMI 1325 - AT - Service Tax

Penalty - Valuation of Works Contract - erection, installation and commissioning service - repair and maintenance service - service tax on value of service portion and material cost consumed in providing the aforesaid service - N/N. 12/03-ST - Held that - The Notification 12/03-ST is a conditional one. The appellant is required to establish that the material consumed in providing the output service has been sold to the service recipient, only in such condition the Notification 12/03-ST can be extended. Since, there are no documents produced by the appellant, we are of the view that the matter should be reconsidered only on the limited issue of availability of the exemption N/N. 12/03-ST - appeal allowed by way of remand.

Summary

Issues: Service tax liability on service portion and material cost, applicability of Notification No. 12/03-ST, penalty imposition, documentary evidence requirement for exemption.

Analysis:
1. Service Tax Liability: The appellant provided erection, installation, commissioning, repair, and maintenance services without discharging the service tax on the value of service portion and material cost. The demand was raised on the gross value of services, which was confirmed by the adjudicating authority and upheld by the Ld. Commissioner, leading to the present appeal.

2. Applicability of Notification No. 12/03-ST: The appellant claimed the benefit of Notification No. 12/03-ST for exemption from service tax on the material cost. The appellant's representative argued that the service tax on the service portion was paid along with interest before the issuance of the show-cause notice (SCN). However, the Tribunal noted that the Notification 12/03-ST is conditional, requiring the appellant to prove that the material consumed in providing the service was sold to the recipient. Since the appellant failed to produce documentary evidence of such sale, the Tribunal decided to reconsider the matter solely on the availability of this exemption notification.

3. Penalty Imposition: The appellant's representative contended that since the service tax paid along with interest was not collected from the service recipient, no penalty should be imposed. The Tribunal acknowledged conflicting submissions regarding whether the service tax was collected or not, a factual matter that needs verification by the adjudicating authority. If it is found that the service tax was not collected by the appellant, they may be entitled to a waiver of the penalty.

4. Documentary Evidence Requirement: The Tribunal emphasized the need for documentary evidence to support claims for exemption under Notification No. 12/03-ST. In the absence of documents proving the sale of goods consumed in providing the service, the Tribunal remanded the matter to the original authority for further consideration solely on the issue of the exemption notification's applicability.

In conclusion, the Tribunal set aside the impugned order and directed a reconsideration of the case focusing on the availability of the exemption notification and the verification of whether the service tax was collected by the appellant, with the possibility of waiving the penalty if the tax was not collected.