2009 (6) TMI 411 - AT - Service Tax

Issue involved in this case is regarding service tax liability on the applicant under the category of maintenance and repair services for the period July 2003 to March 2005 - It is his submission that they have entered into an agreement for maintenance and operation of INFINET net work of client - It is his submission that post 16-6-05, they are discharging the service tax liability on the amounts received from client - Board s Circular No. B1/6/2005-TRU dated 27-7-2005 clarifying amendment to relevant service - In view of the above reproduced Board s circular, prior to 16-6-05, it is difficult to construe that operation and maintenance carried out by the applicant is liable for service tax. We find that the applicant has made out a prima facie case for complete waiver of the dues - Application for wavier of the pre-deposit of the amounts involved is allowed and recovery thereof stayed

Summary

Issues:

1. Service tax liability on maintenance and repair services for the period July 2003 to March 2005.
2. Interpretation of the agreement between the appellant and Institute for Development and Research in Banking Technology (IDRBT).
3. Applicability of service tax on operation and maintenance services.
4. Review of the order by the Commissioner under Section 84.
5. Prima facie case for complete waiver of dues.

Analysis:

The case involved a stay petition against the waiver of pre-deposit amounts, including service tax and penalties under various sections. The appellant argued that the service tax liability was related to maintenance and repair services provided to IDRBT. The adjudicating authority dropped the proceedings, but the Commissioner, as a reviewing authority, confirmed the demand. The appellant contended that the services were not taxable before a specific date and highlighted the agreement terms with IDRBT. The JCDR, however, argued that operation inherently includes maintenance, making the services taxable.

Upon examining the agreement, the Tribunal noted Clause 4, which outlined the obligations of the appellant to operate and maintain the INFINET network for IDRBT. Referring to a Board's Circular, the Tribunal clarified the taxability of services under maintenance or repair. The Circular specified that maintenance or repair services under a contract were taxable, even if not explicitly labeled as a maintenance contract. Considering this, the Tribunal found it challenging to establish the liability for service tax on operation and maintenance services before a certain date.

Ultimately, the Tribunal found that the appellant had presented a prima facie case for a complete waiver of the dues, as confirmed by the Commissioner's review. Consequently, the application for the waiver of pre-deposit amounts was allowed, and the recovery was stayed pending the appeal's disposal.