2019 (2) TMI 478 - AT - Service Tax

Nature of activity - manufacture or service - re-treading of worn out tyres for various clients - extended period of limitation - Held that - Hon ble Apex Court s decision in the case of Safety Retreading Co. (P) Ltd. (supra) has impliedly decided the issue, wherein, their Lordships have specifically held that the value to be considered in retreading of tyres does not include the value of the material, extended the benefit of notification No. 12/2003-ST, dt. 20.06.2003, if the assessee is able to evidence the material issuage - thus, the respondent is eligible for the benefit of notification No. 12/2003-ST and service tax needs to be collected only on the value of services rendered which can be arrived at by considering the Chartered Accountant s certificate produced. Time Limitation - Held that - There is no suppression or misstatement of facts with intent to evade payment of service tax by the appellants. Hence the demand made in show cause notice and confirmed in the order impugned is hit by time bar and is to be restricted to one year (from the date of service on the appellant s back to one year) that is to be paid with interest. Appeal allowed in part.

Summary

Issues:
Classification of services as Works Contract Service or Maintenance or Repair Service
Applicability of extended period for tax demands

Analysis:
1. Classification of services: The appeal involved a dispute over the classification of services provided by the respondent, who was engaged in retreading worn-out tires. The Revenue authorities contended that the activity fell under Maintenance or Repair Services, while the respondent classified it as Works Contract Services. The adjudicating authority confirmed demands for service tax from 2005 onwards, invoking the extended period. The first appellate authority agreed that retreading constituted Maintenance or Repair Services but set aside demands for the extended period due to correspondence between the respondent and Revenue authorities.

2. Applicability of extended period: The Revenue challenged the dropping of demands for the extended period, alleging suppression of information by the respondent. The Tribunal considered the facts, noting that the respondent had registered under Works Contract Services post-2007 and paid taxes accordingly. The Tribunal cited a previous decision that supported the classification of retreading activities as Works Contract Services and emphasized the importance of evidence regarding material usage. It upheld the first appellate authority's decision to drop demands for the extended period based on correspondence and lack of intent to evade taxes.

3. Legal Precedents: The Tribunal referenced the Supreme Court's decision in a similar case, emphasizing the importance of evidence and lack of intent to evade taxes in determining the applicability of the extended period for tax demands. The Tribunal also cited previous judgments supporting the classification of retreading activities as Maintenance or Repair Services, based on the value of services rendered and material usage.

4. Conclusion: The Tribunal upheld the first appellate authority's decision, agreeing that the respondent's services fell under Maintenance or Repair Services from 2005. It emphasized the importance of evidence, legal precedents, and lack of intent to evade taxes in determining the applicability of the extended period for tax demands. The appeal filed by Revenue challenging the impugned order was rejected, and the Tribunal upheld the decision in favor of the respondent.