2018 (4) TMI 294 - AT - Service Tax

Valuation - inclusion of cost of materials - Maintenance or repair service - Department took the view that the cost of materials also should be included for the purpose of levy of service tax - benefit of N/N. 12/2003-ST dt 26/02/2003 - Held that - the issue for the earlier period stands settled in favor of the appellants in the case of M/s. Hindustan Aeronautics Limited Versus The Commissioner of Service Tax Bangalore 2013 (12) TMI 799 - CESTAT BANGALORE , where it was held that the benefit is allowable inasmuch as the value of material which has been used in the course of repair has been specifically mentioned and service tax paid already on the value of service. There is no justification In the stand of the Department that service tax is to be paid by including the value of the materials. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Dispute over service tax on maintenance or repair services.
2. Interpretation of Notification No. 12/2003-ST regarding deduction for materials used in repair and maintenance.
3. Applicability of service tax on the value of materials used in repair services.
4. Comparison with previous decisions favoring the appellant.
5. Justification of impugned orders by the Department.

Analysis:
1. The appeals involve a dispute regarding the payment of service tax on maintenance or repair services provided by the appellant for various divisions. The Department initiated proceedings to demand service tax on the value of materials used in the repair services, resulting in a confirmation of demand for differential service tax.

2. The appellant claimed the benefit of Notification No. 12/2003-ST, which allows a deduction for the value of materials used in repair and maintenance, subject to certain conditions. The Department initially disallowed this benefit, arguing that the materials used in repair were not "sold" as the services were provided to the Defence Department.

3. The Tribunal considered previous decisions, including one where the Tribunal observed that the appellant had fulfilled the conditions required to avail the benefit of Notification No. 12/2003-ST. The Tribunal noted that the invoices clearly showed the separate cost of materials and service, indicating that the appellant had not availed Cenvat credit.

4. The Tribunal found that the benefit of Notification No. 12/2003-ST was allowable, as the value of materials used in repair was specifically mentioned, and service tax was already paid on the value of service. This decision was consistent with a previous ruling in the appellant's favor for a different period.

5. Consequently, the Tribunal set aside all impugned orders and allowed the appeals, as the Department's stand on including the value of materials for service tax payment was deemed unjustified. The decision was dictated in open court on 11/12/2017.