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TMI Blog2011 (3) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... y invokable and penalty under sections 76, 77 and 78 of Finance Act, 1994 (hereinafter referred to as the Act ) was leviable. 2. The first appellate authority in Para 5 of the order undisputedly found that the appellants were undertaking retreading of old tyres against the supply order received from the Defence Department of Govt.of India. According to Revenue retreading of old tyres undertaken by the appellants was maintenance and repair activity in terms of Section 65 (64) of the Act for which liability arose w.e.f.1.7.2003. 3. The adjudication related to two show cause notices issued as under: Sr. No. Show Cause Notice No. and date Amount of Service tax demanded Order-in-Original No. and date Period involved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Registration under section 69 of the Act was levied. 4.1 Order of the learned first appellate authority was challenged on the principal ground that the matter was decided without examining legal position as it existed prior to 16.6.05. Prior to 16.6.2005, maintenance or repair service falling under section 65 (64) of the Finance Act, 1994 was defined as under: maintenance or repair means any service provided by - (i) any person under a maintenance contract or agreement; or (ii) a manufacturer or any person authorised by him, in relation to maintenance or repair or servicing of any goods or equipment, excluding motor vehicle 4.2 According to appellant, prior to 16.6.05, Maintenance and Repair carried on under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sure for a consideration. In para 9 of the order, he examined the scope of the activity undertaken by the appellant. Appellant s contention that the tyre retreading was neither maintenance nor repair prior to 16.6.05 was not acceptable to him. In para 7 of the order, he dealt with meaning maintenance and repair as defined in section 65 (64) of the Finance Act, 1994. According to him, the activity was like works contract for repair of old tyres and Board s Circular No.B1/6/2005-TRU dated 27.07.2005, clarified that prior to 16.6.2005 repair service carried out without contract or agreement was not taxable. He was of the view that when the activity was carried out for the benefit of other that was so done under a contract only. In para 9 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not relating to the goods manufactured by the appellant and no maintenance of tyres manufactured by others shall not make the appellant liable to tax. Prior to 16.6.2005, maintenance and repair activity carried out under contract or agreement was alone covered by service tax law for taxation. Repairs or servicing not being covered by maintenance contract or agreement were not liable to tax. Retreading of tyres on job work was not taxable. CBEC s circular clarified that maintenance was to keep machine, building, etc. in good condition by periodical checking and servicing or repair. Repair is only one time activity while maintenance is a continuous one and repair and maintenance carried out without a contract or agreement were not liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.1 Analysis of the above section throws light that any service provided under maintenance contract or agreement between the parties were taxable service. Similarly any service provided by a manufacturer or a any person authorised by him in relation to the maintenance or repair or servicing of any goods or equipment, excluding motor vehicle were liable to service tax. The parties to the contract are recipient in one hand and the service provided on the other, or recipient in one hand or manufacturer or other person authorised by him on the other. The maintenance contract or agreement may be written or oral. Format or document does not decide the taxability while substance of the contract decides incidence of the contract. 10.2 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obligations of each other recognising services to be provided by the appellant was the essence of the contract followed by certain penalties and warranty clauses in the contract. The meaning of repair or maintenance under section 65 (64) of Finance Act, 1994 during the material period does not necessarily require a written contract or agreement to be entered into by the parties. When need of one and the contribution of the other to fulfil the need of the former surfaces and promise recognising such contribution followed by consideration payable binds each other that results in a contract or agreement. The offer and acceptance of the proposition of retreading of tyre resulted in binding contract of the parties to carry out their promise. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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