2019 (4) TMI 1267 - AT - Service Tax

Nature of activity - sale or service - retreading of tyre - whether can be classified under management or maintenance or repair service or not? - HELD THAT - Hon ble Supreme Court in the case of Commissioner of Central Excise Customs, Kerala Vs. Larsen Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT , wherein it was held that work contract is separate price of contract in comparison with other taxable service classified in the Act prior to introduction and accordingly it is not possible to classify the tyre retreading partly as work contract and partly as a repair and maintenance contract. It has been held by Hon ble Court that the service tax is leviable on the works contract of service only with effect from 1.7.2007 are not before that. Thus, following the decision of Supreme Court, the demand is set aside. Regarding Appeal No. ST/197/2010 and ST/347/2011 against the order of Commissioner has clarified that the Commissioner has reviewed the order after being aware of the order of Commissioner (Appeals) which was in favour of the appellant assessee. This is in contradiction of the legal provisions as contained in Section 84 of the Finance Act - Appeal No. ST/197/2010 stands dismissed and Appeal No. ST/347/2011 stands allowed. Appeal disposed off.

Issues Involved:
1. Classification of tyre retreading services under "maintenance or repair service" and "management, maintenance or repair service."
2. Taxability of tyre retreading services and applicability of service tax.
3. Validity of the Commissioner’s revision order imposing penalties under Section 76 of the Finance Act, 1994.
4. Compliance with the statutory period of limitation for passing revision orders.
5. Adequacy of documentary proof for claiming exemption under Notification No. 12/2003-ST.

Detailed Analysis:

1. Classification of Tyre Retreading Services:
The core issue was whether the process of tyre retreading falls under "maintenance or repair service" up to 17.4.2006 and "management, maintenance or repair service" from 18.4.2006. The Revenue argued that retreading does not result in a new product but restores the tyre's condition, thus classifying it as repair. The Commissioner (Appeals) and Tribunal upheld this classification, consistent with previous decisions and statutory definitions.

2. Taxability and Service Tax Applicability:
The Revenue contended that the respondent failed to pay the appropriate service tax and did not file ST-3 returns. The demand of ?12,09,627/- was confirmed along with interest and penalties. The Commissioner (Appeals) set aside this order, referencing previous decisions where the material cost was treated as sale/deemed sale under VAT/CST laws. The Tribunal upheld this view, emphasizing that only the service component (30%) is taxable, as per the Supreme Court's ruling in Safety Retreading Co. (P) Ltd. Vs. CCE, Salem.

3. Validity of Commissioner’s Revision Order:
The Commissioner’s revision order, which imposed additional penalties under Section 76, was challenged. The Tribunal found that this order was passed after the Commissioner (Appeals) had already decided the matter, violating Section 84(4) of the Finance Act, 1994, which prohibits revision if an appeal is pending. The Tribunal deemed this a non-application of mind and an abuse of revisionary power, thus invalidating the revision order.

4. Compliance with Statutory Limitation:
The appellant argued that the revision order was passed beyond the statutory period of limitation. The Tribunal agreed, noting that the revision order was issued after the appellate order, making it time-barred and invalid under Section 84 of the Finance Act, 1994.

5. Adequacy of Documentary Proof for Exemption:
The Revenue claimed that the appellant did not provide sufficient documentary proof to claim exemption under Notification No. 12/2003-ST, which exempts the value of goods sold during service provision. The Tribunal, however, found that the appellant maintained adequate records (sales tax assessment orders, purchase orders, stock registers) and paid VAT/CST on the material cost, thus satisfying the exemption requirements.

Conclusion:
The Tribunal dismissed the Revenue’s appeal and allowed the assessee’s appeal, setting aside the revision order. The Tribunal upheld the classification of tyre retreading services under "maintenance or repair service" and "management, maintenance or repair service," confirmed the taxability of only the service component, and invalidated the Commissioner’s revision order for being time-barred and procedurally flawed.

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