2014 (9) TMI 881 - AT - Service Tax

Inclusion of cost of material used during the provision of services - Repair and maintenance service - whether the cost of goods supplied while rendering a service can be subjected to levy of service tax - Held that - issue has been settled by the larger bench of the Tribunal in the case of Hindustan Aeronautics Ltd. (2013 (11) TMI 1410 - CESTAT CHENNAI (LB)) which has considered all the relevant decisions and has come to the conclusion that there cannot be a service tax levy on supply of goods. Respectfully following the said decision in the present case also, we are of the prima facie view that the cost of goods supplied while rendering a repair service cannot be subjected to levy of service tax. Thus the appellant has made out a case for grant of stay - Stay granted.

Summary

Issues:
Service tax demand confirmation, imposition of penalties under Section 76 & 78 of the Finance Act, 1994, eligibility for benefit of Notification No. 12/2003, exclusion of cost of goods sold in maintenance and repair service for service tax levy.

Service Tax Demand Confirmation and Penalties:
The appeal and stay petition challenge Order-in-Original confirming a service tax demand of Rs. 13,75,68,767 along with interest and penalties under Section 76 & 78 of the Finance Act, 1994. The appellant contends that they did not discharge service tax liability on raw materials used in repairs, as it constitutes supply/deemed sale of goods. They argue for abatement under Notification 12/2003-ST or 1/2006, citing constitutional prohibition on service tax for supply of goods. Referring to the Hindustan Aeronautics Ltd. case and the Wipro GE Medical Systems P. Ltd. case, they assert that service tax cannot be levied on goods supplied during repair services. The appellant seeks stay on the confirmation of service tax demand.

Eligibility for Benefit of Notification No. 12/2003:
The appellant claims eligibility for abatement under Notification 12/2003-ST or 1/2006 concerning the exclusion of cost of goods sold in maintenance and repair services from service tax levy. They argue that the supply of goods during repair services should not be subject to service tax, citing precedents from the Supreme Court and Tribunal decisions. The appellant relies on legal interpretations to support their position that the inclusion of the value of goods sold or deemed to have been sold in service tax demands is legally unsustainable.

Exclusion of Cost of Goods Sold in Maintenance and Repair Service for Service Tax Levy:
The Tribunal, in line with the Hindustan Aeronautics Ltd. case, determines that the cost of goods supplied during repair services cannot be subjected to service tax levy. Considering the settled legal position that service tax cannot be imposed on the supply of goods, the Tribunal concludes that the appellant has a prima facie case for the grant of stay. Consequently, the Tribunal grants unconditional waiver of pre-deposit of the adjudged dues and stays recovery during the appeal's pendency.

This detailed analysis of the judgment highlights the issues of service tax demand confirmation, eligibility for abatement under Notification No. 12/2003, and the exclusion of the cost of goods sold in maintenance and repair services for service tax levy, providing a comprehensive overview of the legal arguments and decisions involved in the case.