2019 (3) TMI 711 - AT - Service Tax

Maintenance and Repair services - benefit of abatement - demand of differential service tax - period April, 2004 to December, 2009 - Held that - The invoices raised by the appellant indicate that service tax liability is discharged on 30% of the value of the invoice as services rendered by them - the repairs undertaken by the appellant would get classified under works contract for both the reasons i.e. that the appellant has paid State Government VAT on the materials on 70% of the value and service tax is paid on balance amount evaluated @ 30% of value charged. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Demand of differential service tax for Maintenance and Repair services for the period April 2004 to December 2009.

Detailed Analysis:
The appeal was against Order-in-Original No. 41/2011 (MP) dated 29.07.2011. The issue revolved around the demand of differential service tax from the appellant for Maintenance and Repair services provided to shipping lines. The appellant claimed a 70% abatement towards material cost, which the Adjudicating Authority found incorrect due to lack of evidence. However, the appellant argued that the abatement was evidenced by the discharge of VAT to the State Government, citing the judgment of the Apex Court in CCEC, Kerala Vs. Larsen & Toubro. The appellant contended that as the repair activity was a works contract, service tax liability did not arise pre or post 01.06.2007. This argument was supported by a previous Tribunal judgment in a similar case. The Departmental Representative reiterated the lower authorities' findings.

Upon careful consideration of submissions and perusal of records, it was observed that the appellant discharged service tax liability on 30% of the invoice value for services rendered. The repairs undertaken were classified as a works contract as the appellant paid VAT on 70% of the material value and service tax on the remaining 30%. The judgment of the Apex Court in the L&T case was deemed applicable. Additionally, a previous Tribunal judgment on Maintenance and Repair services for a similar period supported the appellant's position. The bench concluded that the services provided were maintenance and repair services, including the transfer of materials, forming a composite contract chargeable to service tax only from 01.06.2007. The definition of works contract post-01.06.2007 did not include maintenance and repair services, thus no service tax was chargeable. The invoices clearly separated goods components on which VAT was paid, indicating that service tax could not be charged on those sums.

In light of the above analysis and the alignment with the judgments of the Apex Court and the Tribunal, the bench held the impugned order unsustainable and set it aside, allowing the appeal with any consequential reliefs.