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2022 (5) TMI 568 - AT - Service TaxLevy of Service tax - Composite Maintenance Contract - erection and installation of water treatment plants its repair etc. - whether the activity carried out by the Appellant is taxable service under the management, maintenance or repair service‟ as per department or the said activity is of conversion of portable water out of sea water and not attracting service tax? - benefit of cum-tax value - demand of penalty and interest - HELD THAT - It can be seen from the definition of maintenance or repair services, that the requirement of statute prior to 2005 and even after the 2005 for taxability of the services rendered is very clear i.e. the maintenance or repairs has to be provided by any person under contract or agreement - Undisputedly in the case in hand for the entire period, there was no specific maintenance contract entered by the appellant with M/s Tamil Nadu Water Supply and Drainage Board (TWAD Board). The Appellant is being paid an amount of Rs. 57.94 Per Kilo Liter water and the agreement reveals that the same is for supply of a quantity of 3800 m3 per day portable water of specified standard, on kilo Liter rate basis every day at the inlet of TWAD Board Product water tank of plant site for a period of seven years.As per the clause 42.1 the charges payable by M/s TWAD to Appellant for supply of potable water shall be in nature of water capacity charges, water variable charges and energy charges and invoices is prepared for supply of potable water with the same understanding - the contract is for supply of potable water every day at the inlet of TWAD Board Product water tank of plant site. The said contract/ agreement is not a maintenance contract . Accordingly, the demand raised on the appellant on this count is unsustainable. The entire plant was handed over by TWAD Board to Appellant for operation and completing the contract to TWAD Board in rendering such activities, even if the Appellant undertakes the maintenance or repair services which are for self and the services of management, maintenance or repair are not attracted as the same is not provided to any client/customer - there are no hesitation in holding that the demand of service tax is not sustainable. Benefit of cum-tax value - HELD THAT - The said appeal is solely on the issue of the benefit of cum-tax value extended by the Adjudicating authority to Appellant. Since the matter in favour of Appellant on merit itself, revenue appeal is not sustainable. Demand of penalty and interest - HELD THAT - Since the entire demand has been set aside, consequently penalties and demand of interest are also not sustainable. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Taxability of services under "management, maintenance or repair service." 2. Applicability of service tax on self-service. 3. Validity of demand for periods prior to 16.06.2005. 4. Interpretation of contract as a comprehensive contract versus a maintenance contract. 5. Limitation and invocation of the extended period for demand. 6. Benefit of cum-tax value. Issue-Wise Detailed Analysis: 1. Taxability of Services under "Management, Maintenance or Repair Service": The core issue was whether the activities performed by the appellant fell under the taxable category of "management, maintenance or repair service" as per Section 65(64) of the Finance Act, 1994. The Tribunal examined the contract between the appellant and the Tamil Nadu Water Supply and Drainage Board (TWAD Board), which involved rejuvenation, replacement of membranes, and supply of potable water. The Tribunal found that the contract was primarily for the supply of potable water and not a maintenance contract. Hence, the demand raised on this count was deemed unsustainable. 2. Applicability of Service Tax on Self-Service: The appellant argued that the services provided were essentially for the operation of their own plant, which was under their ownership for seven years as per the contract. The Tribunal agreed, referencing the case of CMS (I) Operations & Maintenance Co. Pvt. Ltd., where it was held that services rendered for self-operation do not attract service tax. Thus, the demand for service tax on self-service was not applicable. 3. Validity of Demand for Periods Prior to 16.06.2005: The appellant contended that the definition of "maintenance or repair" services was amended on 16.06.2005 to include maintenance of immovable property. Therefore, any demand for periods prior to this date was without authority of law. The Tribunal agreed, citing that the demand prior to 16.06.2005 was not sustainable as the services did not fall under the taxable category before the amendment. 4. Interpretation of Contract as a Comprehensive Contract versus a Maintenance Contract: The appellant argued that the contract was a comprehensive one and could not be vivisected to separate the value of service tax. The Tribunal reviewed the contract and concluded that it was for the supply of potable water, with maintenance activities being incidental. Therefore, it was not a maintenance contract, and the demand based on this interpretation was unsustainable. 5. Limitation and Invocation of the Extended Period for Demand: The appellant contended that the demand was time-barred as another show cause notice invoking the extended period had been issued on the same grounds. The Tribunal found merit in this argument, referencing the Supreme Court's decision in Nizam Sugar, which held that repeated invocation of the extended period on the same grounds was not permissible. Thus, the demand was barred by limitation. 6. Benefit of Cum-Tax Value: The revenue's appeal challenged the adjudicating authority's extension of the cum-tax value benefit to the appellant. However, since the Tribunal decided the matter in favor of the appellant on merits, the revenue's appeal on this issue was dismissed as unsustainable. Conclusion: The Tribunal set aside the entire demand for service tax, penalties, and interest, finding that the contract was not a maintenance contract and the services were self-rendered. The appellant's appeals were allowed with consequential reliefs, and the revenue's appeal was dismissed. The judgment was pronounced in the open court on 05.05.2022.
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