2024 (8) TMI 205 - AT - Service Tax

Short payment of service tax - Business Auxiliary Services - difference in the assessable income as perST-3 returns and comparison thereof with the value from balance sheet - HELD THAT - For the activity of maintenance/repair by way of rendering it as a Works Contract Service, the service tax is payable on 70% of the total amount charged for Works contract. The outcome of these documents and the observations above sufficiently prove that the appellant is eligible for 70% abatement in terms of Rule 2A of Valuation Rules for providing Works Contract Service (annual maintenance services along with spare parts). The eligibility has been absolutely ignored by the adjudicating authority below. It is observed that prior filing reply dated 23.03.2021, the appellant had also filed reply to the letter summoning response from the appellant. Vide his letter dated 27.10.2019 it was duly brought to the notice to the department that the appellant has two service tax registration numbers. One is for Business Auxiliary Service and various other services and another is for Survey and Exploration of Mineral Services. The amount in question is towards rendering Repair and Maintenance Services under the registration meant for Survey and Exploration of Mineral Services. The balance sheet of the appellant are also on record. Perusal thereof shows that the amount in question is towards sale of services to M/s. MECL. The contention of the appellants since beginning is that they had rendered Works Contract Services to said M/s. MECL which is already found duly supported by the documents on record. It becomes clear that the services of maintenance to be provided were inclusive of supply of spare parts/machine parts i.e. the sale of goods - the order under challenge is hereby set aside - appeal allowed.

Issues involved:
1. Alleged short payment of service tax for the financial year 2016-17.
2. Discrepancy between the amount shown in balance sheet and ST-3 returns.
3. Eligibility for abatement on the quantum of service tax under Rule 2A of Valuation Rules, 2006.
4. Failure to establish the services as works contract under repair and maintenance services.
5. Dispute regarding the nature of services provided and the applicability of Rule 2A of Valuation Rules.

Detailed Analysis:
1. The appeal was filed to challenge the Order-in-Appeal alleging short payment of service tax for the financial year 2016-17. The department observed a difference in assessable income between ST-3 returns and the balance sheet, leading to a demand for recovery of service tax. The order was initially confirmed but later dismissed in the appeal.
2. The discrepancy between the amount shown in the balance sheet and ST-3 returns was highlighted. The appellant contended that they had rendered works contract services for which service tax had been correctly paid. The appellant argued that the demand was erroneous as service tax had been paid on 70% of the works contract service provided to M/s. MECL.
3. The eligibility for abatement on the quantum of service tax under Rule 2A of Valuation Rules was a key issue. The appellant provided documents supporting their claim, including comprehensive annual maintenance contracts and sample invoices. The appellant argued that the service tax had been correctly paid based on the works contract service provided.
4. The failure to establish the services as works contract under repair and maintenance services was disputed. The appellant provided evidence showing that the maintenance services included the supply of spare parts, making it a works contract service. The Commissioner's findings were challenged as not supported by the documentary evidence provided.
5. The dispute regarding the nature of services provided and the applicability of Rule 2A of Valuation Rules was crucial. The appellant's contention that the services provided were works contract services was supported by the agreement and invoices, indicating the supply of goods along with maintenance services. The order was set aside, and the appeal was allowed based on the evidence presented.

← Previous Next →