2015 (1) TMI 293 - AT - Service Tax

Demand of service tax - Imposition of penalty - Management, Maintenance or Repair Service - Held that - Appellants are engaged in supply of products which are used in pharmaceutical industries and which are designed according to the chemicals which are used in pharmaceutical industries and based on the nature of manufacturing process, there is a need to identify which type of product a customer should buy. There is no question of maintenance or repair in respect of the products since the products can only be discarded once the lining of the product is accumulated by the content which is passing through the same. There is no question of repairing or maintaining the same and it has to be thrown out. He relied upon technical opinion given by an analyst. Assessee fairly agreed that this opinion was not before the original authority or the Commissioner (Appeals). It was agreed that the fact that it cannot be repaired at all has not been considered or verified in sufficient details. Thus most important aspect which has a bearing on the classification of service has not been considered in depth. Therefore instead of granting stay and keeping the matter pending, we consider it appropriate that the matter should be remanded to the original adjudicating authority at this stage itself - Decided in favour of assessee.

Summary

Issues Involved:
Classification of services provided by the appellant as Management, Maintenance, or Repair Service for the purpose of service tax liability.

Analysis:
The judgment deals with the classification of services provided by the appellant, a subsidiary of a Japanese company, to the parent company. The agreement between the appellant and the parent company outlines provisions for technical services, sales promotion, order management, product compliant handling, and product marketing services. The issue at hand is whether these services fall under the category of Management, Maintenance, or Repair Service, leading to a demand for service tax amounting to Rs. 38,55,956/- along with interest and penalties under various Sections of the Finance Act, 1994.

Upon hearing both sides and examining the agreement, the Tribunal noted a lack of clarity regarding the specific nature of work undertaken by the appellant that could be classified as Management, Maintenance, or Repair Service. The appellant was found to receive consideration even for sales made by the parent company to another distributor. The appellant's counsel argued that the services provided were related to marketing support, technical support, and complaint handling, particularly in assisting customers to identify suitable products for purchase. The products supplied by the appellant are used in pharmaceutical industries and are designed based on specific chemical requirements, making it necessary to determine the appropriate product for each customer based on their manufacturing processes.

The counsel further contended that the products cannot be repaired or maintained due to the nature of their usage, as they need to be discarded once the lining is accumulated by the passing content. Referring to a technical opinion provided by an analyst, the counsel acknowledged that this opinion was not presented before the original authority or the Commissioner (Appeals). The Tribunal recognized that the critical aspect of whether the products could be repaired at all was not thoroughly examined, emphasizing the need for a detailed verification of the claims made by the appellant. Consequently, instead of granting a stay and keeping the matter pending, the Tribunal decided to remand the case to the original adjudicating authority for a comprehensive reconsideration of all issues, including conducting necessary verifications and providing a well-reasoned order based on all submissions made before the Tribunal and the original authority.

In conclusion, the judgment highlights the importance of a thorough examination of the nature of services provided to determine the appropriate classification for service tax liability. The decision to remand the matter to the original adjudicating authority underscores the need for a comprehensive review of all aspects to ensure a fair and informed decision based on the complete set of submissions and verifications.