2018 (12) TMI 258 - AT - Service Tax

Valuation - Maintenance and repair service - repairing/reshelling the old and worn out rollers of sugar mills - whether the cost of the scrap generated during the course of repair of their customer s, sugar rollers would form part of the service so as to discharge the service tax on the same or not? - Held that - It is not a case where particular activity is being adjudged as a manufacturing activity or service activity, in which case the payment of Excise Duty on the scrap so arisen is the relevant consideration for holding the activity as not amounting to manufacture. In the present case the dispute relates to the value of the admitted service, which is leviable to service tax. The appellants are being paid for the said service by their service recipient, in cash as also in kind. The payment in kind is equivalent to value of the scrap which the appellant has been allowed to retain. The payment made in cash to the extent of ₹ 100/- and in kind to the extent of ₹ 50/-, being the value of scrap is required to be considered as the value of the service. The fact of clearance of said scrap on payment of duty of Excise has no relation for arriving at the value of the service - thus the value of the scrap is required to be added in the value of the services. Time Limitation - Held that - The charge of suppression cannot be maintained, the Lower Authorities have not adverted to the said fact and as such we deem it fit to remand the matter to the Original Adjudicating Authority for deciding the issue of limitation afresh, based upon the documentary evidence on record. Appeal is rejected on merits and remanded on limitation.

Summary

Issues:
1. Whether the cost of scrap generated during the repair of sugar rollers should be included in the value of services for service tax liability.
2. Whether part of the demand is barred by limitation due to delayed raising of the issue.

Issue 1:
The case involved a dispute regarding the inclusion of the cost of scrap generated during the repair of sugar rollers in the value of services for service tax liability. The appellant, engaged in manufacturing sugar mill machinery and providing maintenance and repair services, was retaining scrap generated during repairs. The authorities contended that the job charges did not solely cover the repair service, as the scrap value was also considered in the transaction. The appellant argued against double taxation, stating that paying excise duty on the scrap and service tax amounted to duplication. However, the Tribunal held that the value of the scrap needed to be added to the service value, as it was part of the consideration received by the appellant for their services, both in cash and kind. The Tribunal emphasized that the excise duty on the scrap was irrelevant to determining the service value, dismissing the appellant's argument.

Issue 2:
Regarding the limitation on part of the demand, the appellant claimed that they had informed the authorities about their excise duty payment on scrap in 2007, negating any suppression charge. The Tribunal noted that the Lower Authorities had not considered this fact and decided to remand the matter to the Original Adjudicating Authority for a fresh determination on the limitation issue based on the documentary evidence presented. The Tribunal upheld the rejection of the appeal on merits but directed a reevaluation of the limitation issue and left the decision on penalty open for the Adjudicating Authority to decide in new proceedings.

In conclusion, the judgment clarified that the cost of scrap generated during repairs should be considered in the value of services for service tax liability. The Tribunal remanded the limitation issue for further review based on the appellant's submission of prior communication regarding excise duty payment on scrap. The penalty decision was left open for the Adjudicating Authority to decide in subsequent proceedings.