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2025 (2) TMI 12 - AT - Service TaxLevy of service tax on the entirety of income as consideration for having rendered management maintenance or repair service under the authority of section 65(105)(zzg) of Finance Act 1994 and as consideration for service as defined in section 65B(64) of Finance Act 1994 for the respective periods - exclusion of amount received as sub-contractor - HELD THAT - It is noticed that partial disaggregation resorted to for taxing of works contract service and security services while excluding taxability for non-conformity of some with definition in section 65(64) of Finance Act 1994 is tantamount to adoption of inconsistent ascertainment of leviability. There is no doubt that the provisioning of roads facilities and infrastructure for residents of designated areas devolves statutorily upon local authorities as defined in the Constitution and the respective statutes. These are not commercial ventures of the local authority and consequently should be covered in the exemptions or exclusions that are available to such authorities under law. As pointed out by the Learned Counsel for the appellant the decisions of the Hon ble Supreme Court in COLLECTOR OF C. EX. VADODARA VERSUS DHIREN CHEMICAL INDUSTRIES 2001 (12) TMI 3 - SUPREME COURT and in COMMISSIONER OF CENTRAL EXCISE BOLPUR VERSUS M/S RATAN MELTING WIRE INDUSTRIES 2008 (10) TMI 5 - SUPREME COURT bind subordinate officers to the confines of circulars of Central Board of Excise Customs (CBEC) and the contextual reference to these in the submissions of the appellant-assessee have not been considered by the adjudicating authority. The appellant-Commissioner while not touching upon the exclusion of multi-functional belts has assailed inclusion of consideration received from the principal contractor by reference to entries in the books of accounts. Conclusion - The tax liability would have to be adjudged strictly in conformity with the proposal for taxing the consideration as management maintenance or repair service for the period prior to July 2012 and to the extent that the impugned order has not the matter requires a fresh appraisal. The matter remanded back to the adjudicating authority for a fresh decision strictly on conformity of the proposals made in the show cause notice with the provisions of law as existed prior to 1st July 2012 and for the period thereafter - appeal allowed by way of remand.
ISSUES PRESENTED and CONSIDERED
The core issues considered in this judgment were:
ISSUE-WISE DETAILED ANALYSIS 1. Taxability of Services Prior to 1st July 2012 The relevant legal framework involved section 65(105) of the Finance Act, 1994, which enumerated taxable services, and section 65A, which provided guidance on classifying composite services. The Court noted the adjudicating authority's reliance on these provisions to classify the services rendered by the appellant-assessee as 'management, maintenance or repair service' based on the essential character of the services. The Court found that the adjudicating authority's approach lacked legal rigor due to insufficient examination of the specific activities and contracts. The adjudicating authority had not adequately disaggregated the consideration among various activities, leading to an incomplete adjudication. The Court emphasized the need for a detailed examination of the bills and contracts to determine the appropriate classification and taxability of each activity. 2. Applicability of the 'Negative List Regime' and Exemptions Post-1st July 2012 The legal framework post-1st July 2012 involved section 66B of the Finance Act, 1994, which imposed tax on all services except those specified in the negative list or exempted. The appellant-assessee argued that certain activities, such as horticulture and allied services, were exempt under section 66D(d) and relevant notifications. The Court noted that the adjudicating authority had inconsistently applied exemptions and failed to consider the statutory exemptions available to local authorities. The Court highlighted the need for a consistent approach in determining taxability, especially when services are rendered to government or local authorities. 3. Exclusion of Certain Receipts from Taxable Value The appellant-assessee contended that receipts from 'multi-function belts' and as a 'sub-contractor' were not attributable to the contract with MCGM and should be excluded from taxable value. The adjudicating authority had accepted this explanation without adequately verifying the treatment of these receipts in the books of accounts. The Court found that the adjudicating authority's acceptance of the appellant-assessee's explanation lacked thorough verification and required a fresh appraisal. The Court emphasized the need for a detailed examination of the books of accounts to ascertain the correct treatment of these receipts. 4. Revenue's Appeal Against Exclusions and Misclassification The Revenue challenged the exclusion of certain activities from tax liability, arguing that the adjudicating authority had erroneously applied exemptions and misclassified activities. The Court noted that the adjudicating authority had relied on circulars and tribunal decisions that were not fully applicable to the facts of the case. The Court emphasized the need for the adjudicating authority to adhere to the principles established by higher courts and to ensure that circulars and tribunal decisions are applied correctly in the context of the case. SIGNIFICANT HOLDINGS The Court set aside the impugned order and remanded the matter back to the adjudicating authority for a fresh decision. The Court instructed the adjudicating authority to strictly conform to the proposals made in the show cause notice and the provisions of law as they existed prior to 1st July 2012 and for the period thereafter. The Court highlighted the following core principles:
The Court concluded that the tax liability should be adjudged strictly in conformity with the proposals for taxing the consideration as 'management, maintenance or repair service' for the period prior to July 2012 and required a fresh appraisal for the period thereafter.
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