2024 (9) TMI 699 - AT - Service Tax

Exemption from service tax - repair maintenance of electrical transformers - N/N. 11/2010-S.T. dated 27.02.2010 - HELD THAT - The appellant did not file any written reply to the show cause notice nor did he appear for personal hearings, as recorded by the original adjudicating authority. It is also noted that the appellant filed an appeal before the Commissioner (Appeals) but failed to appear when personal hearings were fixed, as has been recorded in para 4 of the Order-in-Appeal dated 31.01.2018. The impugned order has noted that the appellant has not been able to establish that appropriate VAT was paid on the materials used in the provision of such service. Further, it has been alleged by the Department that the appellant has artificially divided the amounts in their bills, for which there is no explanation by the appellant. There has been no submission by the appellant regarding their liability to pay service tax on GTA. These are questions of fact, which needs to be examined at the original level. This case needs to be remanded to the original adjudicating authority to examine the allegations afresh. The appellant is also directed to ensure that a detailed response to the allegations be filed before the original authority, along with all supporting documents such as bills, VAT returns, invoices, Contract, Work Orders etc and other relevant documents to buttress their case. Appeal allowed by way of remand.

Summary

Issues:
Appeal against order confirming demand for service tax on repair and maintenance of electrical transformers. Interpretation of Notification No. 11/2010-S.T. dated 27.02.2010 for exemption. Composite nature of contracts for repair services. Taxability of transportation charges. Allegations of non-payment and evasion of service tax. Failure to establish VAT payment on materials used. Need for remand to original adjudicating authority for detailed examination.

Detailed Analysis:

1. Interpretation of Notification No. 11/2010-S.T. dated 27.02.2010:
The appellant contended that the repair and maintenance services provided to M/s MPPKVVCL were exempted under this notification as transformers are vital for electricity transmission. They argued that the authorities erred in not granting this exemption. The Department, however, argued that the contracts were composite in nature, involving both parts supply and repair services, and therefore, service tax was correctly chargeable on the gross amount.

2. Composite Nature of Contracts:
The Department highlighted that the contracts were indivisible and composite, with the appellant artificially bifurcating them into maintenance and labor costs. They argued that any goods used for services were consumed during repair, with no transfer of material to the service receiver. The appellant failed to prove VAT payment on these materials, leading to correct service tax chargeability on the gross amount.

3. Taxability of Transportation Charges:
The Department argued that the appellant paid transportation charges for which they were reimbursed by the service recipient. They contended that service tax was applicable on GTA services under specific provisions of the Finance Act, 1994, emphasizing the liability for paying service tax in relation to taxable services provided by goods transport agencies.

4. Allegations of Non-Payment and Evasion of Service Tax:
The Department accused the appellant of not correctly discharging their service tax liability, contravening the Finance Act, 1994. They alleged deliberate suppression of facts to evade payment, leading to the applicability of the extended period and penalty under Section 78 of the Finance Act. The Department cited a tribunal decision to support their argument.

5. Remand to Original Adjudicating Authority:
Upon hearing both parties, the Tribunal noted the appellant's failure to file written replies or appear for hearings at the original level. While the appellant's counsel raised certain points during the Tribunal hearing, it was deemed necessary to remand the case to the original authority for a detailed examination of the allegations. The appellant was directed to provide a comprehensive response with supporting documents for further evaluation.

In conclusion, the appeal was allowed by way of remand, emphasizing the need for a thorough re-examination of the case by the original adjudicating authority to address the complex issues raised by both parties.