2017 (11) TMI 353 - AT - Service Tax

Management, Maintenance or Repair Services - operational activities - levy of service tax - Held that - the facts in relation to operational activities performed by the appellant under the Operation and Maintenance Agreement entered into by them with Madurai Power Corporation are identical to the facts in the earlier decision of this Tribunal in Shapoorji Pallonji Infrastructure Capital Company Ltd. 2017 (6) TMI 225 - CESTAT CHENNAI , where it was held that The activity carried out in the power plant is not solely management of power plant, but operation of the same. The word operation is not used in the definition of Maintenance and repairservices which is relied by department as amended with effect from 16.06.2005 - the consideration apportioned towards operational activities by the appellant will not attract levy of service tax under Management, Maintenance or Repair Services under Section 65 (64) of the Act - decided in favor of appellant. Levy of service tax - consumables - Held that - Appellants herein have not availed any cenvat credit in respect of consumables utilized. This being so, the beneficial provisions of N/N. 12/2003-CE will then be applicable to the appellant - decided in favor of appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Service tax liability on operational activities
2. Service tax liability on value of consumables

Issue 1: Service tax liability on operational activities
The appellant was engaged in producing electricity under an Operation and Maintenance Agreement with a company. The dispute centered around the service tax liability on operational activities. The appellant had divided the work into various categories and paid service tax accordingly. The proceedings initiated against the appellant led to an adjudication order where certain considerations were taken into account for determining the service tax liability. The appellant appealed the decision, arguing that the operational activities should not be considered under 'Management, Maintenance, and Repair Services.' The appellant relied on previous Tribunal decisions and the definition of Business Auxiliary Service to support their claim. The Tribunal found that the operational activities, primarily the generation of electricity, did not fall under management of immovable property and were more aligned with Business Auxiliary Service. The Tribunal referred to previous judgments and held that the appellant's activities were not solely management but operation, thus not attracting service tax under Management, Maintenance, or Repair Services. The impugned order was set aside, and the appeal was allowed.

Issue 2: Service tax liability on value of consumables
The second issue revolved around the service tax liability on the value of consumables used in providing maintenance services. The appellant argued that since they had not availed CENVAT credit on the consumables, the value should not be added to the taxable amount. The appellant cited a Supreme Court judgment to support their contention. The Tribunal agreed with the appellant, noting that the facts in this case differed from previous decisions. As the appellant had not availed CENVAT credit on the consumables, the beneficial provisions of a specific notification were applicable. The Tribunal found in favor of the appellant, setting aside the impugned order on this issue as well. The appeal was allowed with consequential benefits.

In conclusion, the Tribunal ruled in favor of the appellant on both issues, holding that the operational activities did not attract service tax under Management, Maintenance, or Repair Services and that the value of consumables was not taxable due to the appellant not availing CENVAT credit. The impugned order was set aside entirely, and the appeal was allowed with any consequential benefits as per law.