2025 (1) TMI 1151 - AT - Service Tax

Recovery of service tax along with applicable Cesses interest and various penalties - classification of services - Management Maintenance or Repair Service or not - activity of re-treading of used Tyres - applicability of Extended period of Limitation. Classification of services - HELD THAT - The appellant is using consumables which were purchased from sales tax registered dealers which was claimed to have suffered sales tax. This fact has not been found to be false. There is a claim of the appellant on record for extending the benefit of Abatement in terms of N/N. 12/2003 ST dated 20.06.2003 since the value of materials used and sold by the appellant were exempted from service tax - This is a case where works contract was involved and hence the Tyre re-treading is a works contract and the goods used in execution of such contract is clearly liable only to sales tax. Extended period of Limitation - period of dispute is from 2005-06 to 2008-09 for which the SCN was issued on 16.09.2010 by invoking the extended period of limitation - HELD THAT - The Adjudicating Authority has dropped the demand for the year 2008-09 and hence the scope of appeal is for the periods 2005-06 to 2007-08 in which event invoking extended period of limitation stands unjustified. This is because the AA has only negated the claim of abatement for want of proof/evidence while accepting the same insofar as 2008-09 is concerned. It could have been different had the sales-tax return was considered requiring the production of supporting documents like the assessment thereon etc. but in any case the same cannot amount to suppression or fraud to invoke the larger period of limitation. There is also no whisper about the acceptance or otherwise of the sales-tax return by the State authority. Conclusion - i) This is a case where works contract was involved and hence the Tyre re-treading is a works contract and the goods used in execution of such contract is clearly liable only to sales tax not service tax under MMR services. ii) The Revenue failed to justify the extended period of limitation as there was no evidence of suppression or fraud by the appellant. Appeal allowed on limitation.

Summary

The core issue presented and considered in this judgment is whether the activity of re-treading used tyres by the appellant is classifiable under "Management, Maintenance or Repair Service" (MMR) and whether the consequential demand for service tax is justified. The Tribunal also considered whether the extended period of limitation was applicable for the demand raised by the Revenue.

The relevant legal framework involves the classification of services under the Finance Act, which governs the imposition of service tax. The appellant contends that their activity should not be classified under MMR services but rather as a works contract, which would subject the materials used to sales tax instead of service tax. The appellant also seeks the benefit of abatement under Notification No. 12/2003-ST, which exempts the value of materials used and sold from service tax, provided the necessary documentation is submitted.

The Tribunal's interpretation and reasoning focused on the nature of the appellant's business activities and the treatment of materials used in the tyre re-treading process. The Tribunal found that the appellant purchased consumables from sales tax registered dealers, and these purchases were subject to sales tax, as evidenced by the sales tax returns. The Tribunal noted that the Original Authority did not give due consideration to these sales tax returns for the years 2005-06 to 2007-08, despite accepting them for the year 2008-09.

Key evidence included the sales tax returns filed by the appellant, which were accepted by the relevant sales tax authorities. The Tribunal found no reason to disregard these returns for the earlier years, as the appellant was registered with the sales tax authorities and paid applicable sales tax on the consumables used in the re-treading work.

The Tribunal applied the law to the facts by determining that the tyre re-treading activity constituted a works contract, where the goods used are liable only to sales tax. This classification supports the appellant's claim that the activity should not fall under MMR services for service tax purposes.

In addressing competing arguments, the Tribunal considered the Revenue's position that the appellant failed to provide sufficient documentary evidence to support their claim for abatement. However, the Tribunal found that the lack of consideration of the sales tax returns by the Original Authority was unjustified, particularly as these returns were accepted by the State authority for other periods.

The Tribunal concluded that the invocation of the extended period of limitation by the Revenue was unjustified. The Adjudicating Authority had already dropped the demand for the year 2008-09, and the Tribunal found no evidence of suppression or fraud by the appellant that would warrant the extended limitation period. As such, the Tribunal set aside the impugned order on the grounds of limitation and allowed the appeal.

Significant holdings include the Tribunal's determination that the tyre re-treading activity is a works contract subject to sales tax, not service tax under MMR services. The Tribunal also established that the Revenue failed to justify the extended period of limitation, as there was no evidence of suppression or fraud by the appellant. The final determination was to allow the appeal on the limitation issue, setting aside the impugned order.