2024 (9) TMI 701 - AT - Service Tax

Recovery of service tax under section 73 (2) of the Finance Act, 1994 read with section 174 of the Central Goods and Service Tax Act, 2017 with interest and penalty - activity of repair and maintenance, if provided along with material, merits classification under works contract service and the amount on which VAT has been discharged by the assessee has to be excluded from the value of works contract to ascertain the value of taxable services provided by the assessee or not - invocation of Extended period of limitation. HELD THAT - The decision of the Tribunal in M/S. SAMTECH INDUSTRIES AND OTHERS VERSUS CCE. KANPUR AND OTHERS 2014 (4) TMI 995 - CESTAT NEW DELHI clearly holds that when invoices are issued showing the value of the goods used and the service charges separately, service tax would be chargeable only on the service/labour charges and the value of goods used for repair would not be includable in the assessable value of the service. The Commissioner was not justified in including the value of spare parts in the assessable value of service, as the contract was a composite contract involving supply of goods (spare parts and consumer bills) as well as provision of services (repair and maintenance). It needs to be noted that service tax was not leviable on composite contracts up to 01.07.2012 and the period involved in this appeal is from April 2009 to June 2012. Such being the position, the impugned order dated 30.07.2018 passed by the Commissioner cannot be sustained. The impugned order dated 30.07.2018 is, accordingly, set aside - Appeal allowed.

Summary

Issues:
1. Whether the cost of spare parts should form part of the repair and maintenance services provided by the appellant under the composite works contract.
2. Whether the extended period of limitation could have been invoked in the case.

Analysis:
1. The appellant, a public sector undertaking engaged in maintenance and repair services of Heavy Earth Moving Machinery, entered into Maintenance and Repair Contracts with customers. The dispute arose when a show cause notice was issued proposing a service tax demand based on the contention that the Repair Contracts were pure service contracts, and the cost of spare parts should be included in the value of repair services. The Commissioner confirmed the service tax demand, holding that the appellant attributed a disproportionate amount to spares to evade service tax. However, the Tribunal referred to precedents such as Samtech Industries and Voltas Limited cases, stating that service tax should only be charged on service/labour charges, excluding the value of goods used for repair. The Tribunal set aside the Commissioner's order, emphasizing that service tax was not leviable on composite contracts during the relevant period, thus the inclusion of spare parts in the assessable value was incorrect.

2. The appellant argued that the extended period of limitation should not have been invoked. However, the Tribunal did not delve into this issue as it found the inclusion of spare parts in the assessable value to be incorrect based on legal precedents. Therefore, the Tribunal set aside the Commissioner's order without addressing the contention regarding the extended period of limitation.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the order of the Commissioner dated 30.07.2018, as the inclusion of spare parts in the assessable value of service was deemed incorrect based on legal precedents. The issue of the extended period of limitation was not addressed as it was deemed unnecessary in light of the primary issue regarding the assessable value.