2017 (6) TMI 1074 - AT - Service Tax

Works contract service - Maintenance and repair service - it was observed by the department that appellant has provided maintenance and repair service to them for which no service tax appeared to have been paid - Held that - since the maintenance work involved supply of goods for replacement of faulty ones as well as rendering of service, the activity carried out is in the nature of Works Contract Service, even for the period prior to 1.6.2007. The department has not brought any evidence on record to show that the activity carried out prior to 1.6.2007 was different - the demand for Service Tax for the period prior to 1.6.2007 cannot be sustained - appeal allowed - decided in favor of appellant

Summary

Issues:
1. Demand of service tax for maintenance and repair services provided prior to the introduction of Works Contract Services (WCS).
2. Justification for the demand of service tax for the period prior to 1.6.2007 under the category of maintenance and repair services.
3. Applicability of limitation on the demand of service tax for the period 2006-2007.
4. Classification of services rendered as Works Contract Services (WCS) or maintenance and repair services.

Analysis:

Issue 1: The appeal challenged the demand of service tax for maintenance and repair services provided prior to the introduction of Works Contract Services (WCS). The appellant contended that the nature of services rendered remained the same before and after the introduction of WCS, falling under the category of WCS. The department alleged that the services rendered were in the nature of repair and maintenance services.

Issue 2: The appellant argued that there was no justification for demanding service tax for the period before 1.6.2007 under the category of maintenance and repair services. They emphasized that since they were already registered for maintenance and repair services under WCS and paying service tax, the demand for the prior period was unjustified.

Issue 3: The appellant raised the issue of limitation on the demand for service tax for the period 2006-2007. They pointed out that the demand was issued through a Show Cause Notice dated 20.10.2011, and contended that the demand was hit by limitation.

Issue 4: The Tribunal analyzed the nature of services rendered by the appellant both before and after the introduction of WCS. The appellant provided evidence through work orders and VAT registration to support their argument that the maintenance work undertaken involved both services and supply of goods, falling under the category of Works Contract Services. The Tribunal held that the activity carried out was in the nature of WCS even for the period prior to 1.6.2007, citing a Supreme Court decision that services covered within the description of WCS post-1.6.2007 cannot be charged under a different category for the period before that date.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal, ruling that the demand for service tax for the period prior to 1.6.2007 under the category of maintenance and repair services could not be sustained based on the nature of services provided by the appellant.