2018 (1) TMI 1117 - HC - Service Tax

Re-quantification of service tax liability - Valuation - Maintenance or repair service of transformers not manufactured - bonafide doubt - claim of deduction from the value - Held that - Various facets of that aspect were highlighted in the grounds of appeal itself, but the tribunal understood it as only a limited request and for re-quantification. We do not see how the tribunal could have concluded that a casual perusal of the invoices produced before it indicates that the appellant assessee has charged separately for the material consumed and for the service of the repairs of transformers. The tribunal holds that the payment of service tax liability in relation to maintenance or repair service post 15th June, 2006 needs re-quantification, but if that is how it has understood the matter, re-quantification is not reconsideration of the limited prayer of the assessee regarding cost of the material that needs to be reduced from the value of tax liability due. We do not, therefore, think that a restricted remand was sought by the appellant, as is erroneously understood in the order under appeal. - Be that as it may, both aides agree before us that for this limited extent, the matter should go back to the tribunal itself and need not be sent to the adjudicating authority. The assessee would rely on those very materials, which were before the adjudicating authority and forming part of the paper book or records before the tribunal and nothing more. On these materials itself, the assessee would be able to convince the tribunal that the segregation or requantification, as prayed should be made. If this is how the matter is understood by the assessee, then, we see no justification for remanding the matter to the adjudicating authority. We set aside that part of the order, which we have reproduced above i.e. para 6.5 and the ultimate direction in para 6.7 with regard to liability of the appellant to pay service tax post 15th June, 2005 and direct that even if the said service attracts tax and which is admissible and payable, its computation be done afresh in accordance with law - Matter remanded back before the tribunal.

Summary

Issues Involved:
1. Justification of CESTAT in remanding the matter only for reconsideration of certain deductions.
2. Justification of CESTAT in restricting the remand without considering various other deductions.
3. Invocation of the extended period of limitation.

Issue-wise Detailed Analysis:

1. Justification of CESTAT in Remanding the Matter Only for Reconsideration of Certain Deductions:
The assessee was aggrieved by the tribunal's limited direction to remand the matter back to the adjudicating authority only for reconsideration of certain deductions. The tribunal's order dated 30th December 2015 and further order dated 23rd May 2016 refused a complete remand as prayed by the appellant, instead directing a restricted remand. The tribunal upheld the demand of service tax liability and interest for the period post 15th June 2005 but remitted the matter back to the adjudicating authority to reconsider the limited prayer regarding the cost of materials to be reduced from the value on which tax liability is due. The tribunal noted that the appellant had charged separately for materials consumed and services rendered, necessitating re-quantification of the tax liability.

2. Justification of CESTAT in Restricting the Remand Without Considering Various Other Deductions:
The appellant argued that the tribunal failed to consider various other deductions and contentions raised in the grounds of appeal. The appellant contended that the value of parts/materials used in repairs, on which central excise duty and VAT were paid, should not be included in the taxable value as no cenvat credit was availed. Additionally, service tax paid on transportation charges should not lead to double taxation under "Maintenance or Repair Service." The appellant also highlighted the need for adjustment of already paid service tax and consideration of various other charges like testing, value of damaged parts, coils, and scrap. The tribunal's limited remand did not address these comprehensive issues, which the appellant believed would negate the demand if fully considered.

3. Invocation of the Extended Period of Limitation:
The tribunal's cryptic finding on the issue of limitation and invocation of the extended period was upheld. The tribunal sustained the demand by invoking the extended period of limitation based on the correspondence and peculiar facts of the case. The High Court found that the tribunal's finding on this mixed question of fact and law was not wholly perverse or vitiated, thus not warranting a substantial question of law for admission of the appeal. Consequently, the appeal was dismissed to the extent of this issue.

Conclusion:
The High Court allowed the appeal to the limited extent of setting aside the tribunal's order regarding the remand for re-quantification of tax liability post 15th June 2005. The tribunal was directed to reconsider the issue of material cost reduction from the taxable value afresh, taking into account all contentions and materials presented by the appellant. The tribunal was instructed to pass a fresh order after hearing both sides, maintaining and upholding the rest of the tribunal's order. The appeal was allowed in these terms, and the matter was sent back to the tribunal for reconsideration of the specified issue.