2014 (7) TMI 280 - AT - Service Tax

Waiver of pre-deposit of Service Tax - Valuation - Repair and Maintenance services - inclusion of value of goods - Held that - It is the contention of the Revenue that even if VAT is paid on the spare parts, service tax is applicable as the same were not related to the spare parts but services in view of the aspect theory laid down by the Hon ble Supreme Court in the case of Federation of Hotel & Restaurant Association of India, etc. Vs. Union of India & Others - (1989 (5) TMI 50 - SUPREME Court) Tribunal in the case of Surya Transformers (2014 (7) TMI 279 - CESTAT NEW DELHI) observed that, in the event VAT/Sales Tax is paid on the spare parts/ materials used in providing services, its value cannot be included in the service portion of the contract, for discharging the service tax. - prima facie case is in favor of assessee - stay granted.

Summary

Issues:
Application seeking waiver of pre-deposit of Service Tax and penalty under Section 78 of the Finance Act, 1994.

Analysis:
The applicant provided repair and maintenance services using spare parts and manpower, paying Service Tax on labor charges and VAT on spare parts. The dispute arose when the actual service charge exceeded the spare parts' value in some instances. The Revenue argued that service tax is applicable even if VAT is paid on spare parts, citing the aspect theory by the Supreme Court. However, the Tribunal, in a similar case, held that if VAT is paid on spare parts, service tax need not be included in the service portion of the contract.

Conclusion:
The Tribunal found that the applicant had paid appropriate taxes on spare parts and services. Citing a previous decision and a Board's circular, the Tribunal held that the applicant had a prima facie case for a waiver of pre-deposit. As no contrary decision was presented by the Revenue, the Tribunal granted total waiver of pre-deposit and stayed the recovery of dues during the appeal's pendency.