2012 (9) TMI 704 - AT - Service Tax

Application for waiver of pre-deposit dues - services of manpower and logistics, and repair and maintenance of dumpers - service tax paid on former and not on latter on ground that consideration received under the contract for maintenance and repair is towards cost of spare parts and VAT is paid on such charges - assessee contended that once they have paid VAT in respect of maintenance and repair charges which involved sale of goods, there cannot be any demand for service tax for the same amount - Held that - There is no ruling of any Court or Tribunal or any circular of CBEC to the effect that a service provider can pay service tax or VAT at his option. The two levies are under separate provisions in the Constitution and tax due under one enactment cannot be discharged by paying tax under another enactment under a lower rate. Further, tax under a Central enactment cannot be discharged by paying tax under a State enactment. Impugned contract is for providing service and not for sale of goods. In the facts of the case the appellants have not paid service tax on the value received for service as per the existing provisions of section 67 of the Finance Act, 1994 read with provisions of notification 12/2003-ST. Therefore this is not a case for full waiver of pre-deposit of dues for admission of appeal. Pre-deposit of 50% ordered to be deposited within stipulated time Decided against assessee

Issues Involved:
1. Liability of service tax on maintenance and repair charges.
2. Applicability of VAT versus service tax on the charges received.
3. Interpretation of contracts and the nature of the transaction.
4. Validity of the demand raised by Revenue.
5. Consideration of prior judicial decisions and CBEC circulars.

Issue-wise Detailed Analysis:

1. Liability of Service Tax on Maintenance and Repair Charges:
The appellants entered into a contract with M/s Hindustan Zinc Ltd. for maintaining and repairing heavy dumpers, charging under two heads: manpower and logistics, and maintenance and repair. They paid service tax on the former but not on the latter, arguing that VAT was paid on maintenance and repair charges, which they claimed were for spare parts, regardless of actual supply. Revenue contended that service tax should have been paid on maintenance and repair charges after claiming exemption for materials sold as per Notification No. 12/2003-ST. A demand for Rs. 77,19,688/- was confirmed along with interest and penalty.

2. Applicability of VAT versus Service Tax on the Charges Received:
The appellants argued that once VAT was paid on maintenance and repair charges involving the sale of goods, there could be no service tax demand for the same amount. They provided a tabulation showing that in some years, the value of goods supplied exceeded the consideration received, asserting that the entire billed amount was for material supply. Revenue argued that the contract's essential character was for repair and maintenance, not for the sale of parts, and that the demand was made after extending the benefit of exemption for materials sold.

3. Interpretation of Contracts and the Nature of the Transaction:
The appellants relied on prior Tribunal decisions and a CBEC circular, arguing that VAT payment indicated a sale of goods, exempting them from service tax. Revenue countered that the contract was primarily for service, and the payment of VAT did not exempt them from service tax. The Tribunal noted that the essential nature of the contract was for providing services, and the liability under service tax could not be discharged by paying VAT.

4. Validity of the Demand Raised by Revenue:
The Tribunal considered arguments on both sides and found no ruling or circular allowing a service provider to choose between paying VAT or service tax. The Tribunal emphasized that the two levies are under separate constitutional provisions and cannot be interchanged based on lower rates. The Tribunal also noted that the appellants did not provide sufficient evidence to counter the Revenue's claim that the value realized was for services rendered.

5. Consideration of Prior Judicial Decisions and CBEC Circulars:
The Tribunal examined prior decisions and the CBEC circular, concluding that the matter should be decided based on the real nature of the transaction. The Tribunal found that the appellants' argument of paying more tax in later years was not convincing at this prima facie stage. The Tribunal held that the contract was for providing service, and tax under a Central enactment could not be discharged by paying tax under a State enactment.

Conclusion:
The Tribunal ordered the appellants to pre-deposit 50% of the dues arising from the impugned order for admission of the appeal within six weeks. Subject to such pre-deposit, the balance dues' pre-deposit was waived, and its collection stayed during the appeal's pendency. The Tribunal emphasized that the appellants had not paid service tax on the value received for service as per the existing provisions, and the burden was on the appellants to prove otherwise, which they failed to do.

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