2023 (11) TMI 612 - AT - Service Tax

Levy of Service Tax - handling charges received by the Appellant and recovered as part of goods sold, subjected to VAT, Business Auxiliary Services or not - paints procured by the Appellant and used for repairing activities, management, maintenance and repair services or not - design charges paid by the Appellant to the companies outside India, under reverse charge, consulting engineering service or not. Business Auxiliary services - Management, maintenance and repair service - HELD THAT - First of all, benefit of Notification No. 12/2003 would be available to the Appellant since, clearly in the present case invoice has been raised and VAT has been paid including on handling charges. As submitted by the learned Counsel, there is no basis to come to the conclusion that the value shown in the invoice should be equal to the cost and cannot be having any other additional element/ margin - In this case, there is no dispute that the Appellants undertake maintenance and repairs of ships and that is the main activity. When that is the main activity, procurement of paint would be for the purpose of providing the service of MMRS and therefore procurement alone, may not be chargeable separately for tax. Hence, this stand cannot be sustained. Consulting Engineer service - HELD THAT - The Commissioner has recorded finding that the amount was paid in 2006-07, but there is no specific finding that the services were also received in 2006-07. In the absence of such finding and also in view of the submission made by the learned Counsel that service was received prior to 18.04.2006, it is found that Appellant has made out a case for deletion of demand, as Sec 66A was brought on statute w.e.f. 18.04.2006. Appeal allowed.

Issues Involved:
i) Whether service tax is payable on handling charges received by the Appellant and recovered as part of goods sold, subjected to VAT, under the taxable service category of "business auxiliary services" - Rs. 46,18,910/-
ii) Whether service tax is payable on the value of paints procured by the Appellant and used for repairing activities, under the taxable service category of "management, maintenance and repair services" - Rs. 16,58,843/-
iii) Whether service tax is payable on value of design charges paid by the Appellant to the companies outside India, under reverse charge, under the taxable service category of "consulting engineering service" - Rs. 25,70,965/-

Handling Charges Issue:
The Appellant collected handling charges as part of goods sold, subject to VAT, under "business auxiliary services." The Tribunal ruled in favor of the Appellant, stating that the handling charges were in compliance with the law and could be excluded from the taxable value as per Notification No. 12/2003. The Tribunal emphasized that the intent of the parties and the agreement as a whole should be considered, and in this case, the handling charges were not separately taxable.

Paints Procurement Issue:
Regarding the demand on the value of paints procured by the Appellant, the Tribunal applied a previous decision where it was held that only the service component of a transaction is liable to be taxed, not the materials supplied. The Appellant's eligibility for the benefit of Notification No. 12/2003 was proven, leading to a ruling in favor of the Assessee. The Tribunal cited relevant cases to support its decision.

Consulting Engineer Service Issue:
For the demand related to consulting engineer services, the Tribunal found in favor of the Appellant as the service was received prior to the introduction of Sec 66A, which was brought into effect from 18.04.2006. Since there was no specific finding that the services were received in 2006-07, the demand was deemed unjustified. The Appeals were allowed, and the Impugned Orders were set aside, entitling the Appellant to consequential benefits as per the law.

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