2023 (12) TMI 77 - AT - Service Tax

Classification of service - Management Maintenance or Repair Services or not - executed various contracts for their client M/s Tata Steels Ltd. against different work orders awarded by them for Fabrication Erection Cleaning Up keep and Replacement Work - period 2006-07 to 2010-11 whereas the Show Cause Notice was issued on 21-10-2011 - invocation of extended period of limitation - Principles of natural justice - vague SCN. The Appellant has paid service tax on the activities which did not amount to manufacture. HELD THAT - From the impugned order, it is found that the services mentioned in the said purchase order/work order has been held to be taxable broadly under the category of Management, Maintenance or Repair , Erection, Commissioning or Installation Commercial or Industrial Construction . However, the main services provided in the said purchase orders/work order are held as prima facie classifiable under the category of Management, Maintenance or Repair Services. Finally, it has been concluded that the Appellant is liable for payment of service tax under the category of Management, Maintenance or Repair Service. Thus, it Is observed that the finding in the impugned order is not very specific about the classification of the service rendered by the Appellant - it is also observed that the Show Cause Notice is very vague as there is no separate bifurcation under the three categories of service and there is no finding in the Order-in-Original as to how the value of services are taxable under the category of Management, Maintenance or Repair Service , Commercial or Industrial Constriction Service and Cleaning Service . The work of Fabrication undertaken by the Appellant amounts to Manufacture as held by the Larger Bench of the Tribunal in the case of MAHINDRA MAHINDRA LTD. VERSUS CCE., AURANGABAD, CHANDIGARH, KANPUR CHENNAI 2005 (11) TMI 103 - CESTAT, NEW DELHI and hence, it cannot be made taxable under Chapter V of the Finance Act, 1994. Accordingly, we observe that the 'Repalcement' works and fabrication of immovable property work undertaken by the Appellant would not fall under the category of ' Management, Maintenance or Repair Service'. Also, Circular No.B1/6/2005-TRU Dated 27-07-2005, clarifies that maintenance is to keep a machine, building etc in a good condition by periodically checking and service or repairing, while repair is a one time activity, maintenance is a continuous process of which repairing may be incidental and ancillary. In this case, the Appellant has not undertaken any periodical maintenance. They have undertaken repair works as per work orders, as one time activity, which were not liable to service tax under the category of 'Management , maintenance or repair service' during the relevant period. Thus, the demand of service tax under this category is not sustainable. The Appellant has paid service tax on the activities which did not amount to manufacture. For Example, the work of Removal of silt from Drain Tunnel Cleaning Work , the work of Cleaning, Upkeep and removal of Silt are not related to manufacture process, accordingly, service tax has been collected and deposited by the Appellant and the subject matter is not in dispute in the instant case. Thus, out of total 16 work orders, the Appellant has rightly collected service tax against 5 work orders where service tax was liable to be paid and deposited the same with the Department - No service tax was collected on works executed against rest 11 work orders, as the same was not liable to service tax under the category of 'Management, Maintenance or repair Service' as demanded in the impugned order. The impugned order set aside - appeal allowed.

Issues Involved:
1. Classification of services rendered by the Appellant.
2. Justification of service tax demand without bifurcation.
3. Legality of alternate classification for tax demand.
4. Applicability of service tax on "Fabrication," "Erection," and "Replacement" activities.
5. Validity of the Show Cause Notice and Order-in-Original.
6. Limitation period for issuing the Show Cause Notice.

Summary:

1. Classification of Services Rendered:
The Appellant contested that the impugned order was not categorical about the classification of services rendered. The Ld. Commissioner (Appeals) classified the activities of "Fabrication & Erection" and "Replacement" under "Management, Maintenance or Repair Services," but also mentioned other categories like "Commercial or Industrial Construction Services" without bifurcation of tax/taxable value under each category.

2. Justification of Service Tax Demand Without Bifurcation:
The Tribunal observed that the impugned order confirmed a composite service tax demand of Rs.29,45,657/- under multiple categories without any bifurcation. The Show Cause Notice was vague, lacking separate bifurcation under the three categories of service and failing to specify how the value of services was taxable under each category.

3. Legality of Alternate Classification for Tax Demand:
The Tribunal found that resorting to alternate classification for confirming the tax demand was not permissible, rendering the proceedings vague and incoherent. This was supported by previous decisions, including the case of Jai Shree Shyam Borwell Co. vs. CC.

4. Applicability of Service Tax on "Fabrication," "Erection," and "Replacement" Activities:
The Tribunal held that the work of "Fabrication" amounts to "Manufacture" and cannot be taxed under Chapter V of the Finance Act, 1994. Similarly, "Replacement" was distinguished from "Repair," with the former not falling under "Management, Maintenance or Repair Services." The Tribunal also noted that the Appellant's activities did not involve periodic maintenance but were one-time repair works, which were not taxable under the relevant category during the period in question.

5. Validity of the Show Cause Notice and Order-in-Original:
The Tribunal found the Show Cause Notice and Order-in-Original to be vague and unreasoned, with no clear finding on how the services provided were taxable under the specified categories. It was emphasized that the burden of proof lies with the department to establish the taxability of services as claimed.

6. Limitation Period for Issuing the Show Cause Notice:
The demand related to the period 2006-07 to 2010-11, while the Show Cause Notice was issued on 21-10-2011. The Tribunal noted that the demand up to 31-03-2010 was beyond the normal period of limitation of one year.

Conclusion:
The Tribunal set aside the impugned order, holding that the activities undertaken by the Appellant could not be classified under "Management, Maintenance or Repair Services." Consequently, the demand for service tax, along with interest and penalties, was deemed unsustainable. The appeal filed by the Appellant was allowed.

(Pronounced in the open court on 21.11.2023)

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