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TMI Blog2023 (9) TMI 870X X X X Extracts X X X X X X X X Extracts X X X X ..... the original authority has apparently accepted (vide paragraph 18.2 of the Order-in-Original) the apportionment of supply and service value since the valuation of works contract service is required to be done by adopting the Service Tax (Determination of Value) Rules, 2006. He finds that the apportionment has been adopted at 22% for the service portion for the period post September 2014 and hence, has proceeded to hold the same apportionment for the period from 01.07.2012 to 2014-15 (up to 31.08.2014) - thus, the repair and maintenance service, as provided by the appellant in the case on hand, to HVF, Avadi is not amenable to Service Tax under the said category and consequently, the demand to this extent cannot sustain - demand on repair and maintenance / overhauling charges for the period from April 2010 to August 2014 is set aside. Levy of Service tax - liquidated damages collected due to delayed supplies by job workers - period July 2012 to March 2015 and April 2015 to March 2016 - HELD THAT:- Reliance placed on orders of various Benches of the CESTAT wherein the said issue has been settled in favour of the taxpayer - reliance can be placed in M/S NEYVELI LIGNITE CORPORATIO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Finance Act, 1994 and penalty under Sections 76, 77 and 78 ibid. 2.2 For the subsequent period between April 2015 to March 2016, it appears that the assessee was issued with a Statement of Demand dated 17.05.2017 for the alleged non-payment of Service Tax on Repair and Maintenance service and liquidated damages. 3. It appears that the assessee filed its detailed replies dated 18.07.2016 and 12.02.2018 explaining its activities in detail and thereby explaining that their services were exempted since they are only rendering services to the Ministry of Defence, Government of India and that they are also exempted by Notification No. 25/2012-S.T. dated 20.06.2012, read with Section 102 of the Finance Act, 2016. 4.1 The Ld. Commissioner, having considered the explanation of the assessee, during adjudication proceedings, has, inter alia observed as under: - (i) In terms of the service order between HVF and the assessee, the order has been mentioned to be a service order and income tax at the rate of 2% shall be deducted from the bills. (ii) There is a separate clause in the agreement with regard to payment of excise duty and sales tax on the supplies effected by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and subsequent to that date, they were performing an exempted service, which clearly indicates that they are performing some sort of service similar to works contract, but now it has been claimed that they are doing erection / commissioning / installation of original works. But however, it is found that refurbished equipment of an original work cannot be an activity of manufacture. (iii) The assessee has arrived at the apportionment of supply and service values and started paying Service Tax from September 2014 onwards and the apportionment adopted is 22% for the service portion and the rest for the supply portion; that the apportionment has a strong persuasive value. Their contract value admittedly has suffered VAT and hence this 22%, being service portion, is also VAT paid; but however, since the same comes under the domain of the Central Government being a service value, service portion cannot be left without levy of Service Tax as the service portion is leviable to a higher rate of tax. This also would fulfil the requirement of Explanation (c) to Rule 2A of the Service Tax (Determination of Value) Rules, 2006. 4.3 With regard to the demand of Service Tax on the liquidate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and maintenance service for the period from September 2014 to March 2015. He also dropped the demand of Service Tax on repair and maintenance service for the period 2015-16 initiated vide Statement of Demand No. BEL/GLT1/Commr./ST/04/2017 dated 17.05.2017 dated 17.05.2017, but has confirmed the demand on the liquidated damages apart from confirming appropriate interest and penalty, as proposed. 6. It is against this order and the demands therein that the present appeals have been preferred before this forum. 7. Heard Shri Raghavan Ramabadran, Ld. Advocate and Shri Harendra Singh Pal, Ld. Assistant Commissioner. 8.1 The contentions of the Ld. Advocate are summarized below: - The appellant is a Navratna public sector undertaking under the Ministry of Defence and the main function of the assessee is to meet the specialised electronic needs of the Indian defence forces. It is engaged in manufacturing of parts of tanks and other armoured fighting vehicles classifiable under Chapter 87 of the Central Excise Tariff Act, 1985. It is their further case that the Heavy Vehicles Factory, Avadi produces Indian versions of the Soviet era second-generation T-72 Battle Tan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntire activity was undertaken for the Ministry of Defence, Government of India, in respect of battle tanks deployed by the Indian Army. The activity of manufacture and overhauling of gun control stabilizer undertaken by the appellant was exempt from payment of Central excise tax, vide Notification No. 63/1995-CE dated 16.03.1995. The appellant, since is engaged exclusively in the activity of manufacture of defence equipment for the government of India, cannot be held liable under the guise of providing service. He would also contend that repairs and maintenance made to sub-assemblies of Ajeya tanks is not amenable to Service Tax in the light of the exemption made available under Sl. No. 12(a) of Notification No. 25/2012 read with Section 102 of the Finance Act inserted with effect from 14.05.2016 whereby retrospective exemption from payment of Service Tax was granted to any taxable service provided to the Government. The Ld. Advocate further contended that the Orderin-Original has not offered any substantial reasons for not treating the sub-assembly which are overhauled by the appellant as equipment beyond a mere assertion that standalone equipment would only be eligi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d damages could at no stretch of imagination be covered under the definition of consideration within the meaning of Section 2(d) of the Indian Contract Act, 1872: - i. Neyveli Lignite Corporation Ltd. v. Commissioner of Cus., C.Ex. S.T. [2021 (53) G.S.T.L. 401 (Tri. Chennai)] ii. Steel Authority of India Ltd., Salem v. Commissioner [2021 (7) TMI 1092 CESTAT, Chennai] iii. South Eastern Coalfields Ltd. v. Commissioner of C.Ex. S.T., Raipur [2021 (55) G.S.T.L. 549 (Tri. Del.)] iv. M.P. Poorva Kshetra Vidyut Vitran Co. Ltd. v. Principal Commissioner [2021 (2) TMI 821 CESTAT, New Delhi] 8.3 Without prejudice to the above contentions, he would also contend that the Revenue was not justified in invoking the larger period since, primarily, the issue involved was one of interpretation of complex legal provisions; the appellant being a public sector undertaking, there cannot be any motive on the part the appellant, to entertain a belief as to suppression, etc., with an intent to evade payment of tax. In this regard, he has relied on the decision of the Hon ble Rajasthan High Court in the case of Commissioner of Central Excise, Jaipur-I v. M/s. Rajast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /ST/04/2017 dtd. 17.05.2017 3. Demand on liquidated damages collected due to delayed supplies by job workers April 2015 to March 2016 14,78,844/- TOTAL April 2010 to March 2016 2,45,03,304/- 12. We find from the impugned Order-in-Original that there is no dispute as regards facts are concerned: the appellant s activity of re-engineering of sub-assembly of battle tanks being rendered wholly to the Government of India has been duly acknowledged vide paragraph 17.0 of the impugned Order-in-Original. There is no dispute that the appellant has even discharged the VAT, as applicable, on the entire transaction, as acknowledged vide paragraph 18.2 of the impugned order and there is also no dispute about the discharging of Service Tax liability from September 2014 onwards, as could be seen from paragraph 18.5 of the impugned order. 13.1 Admittedly, the appellant is engaged in the manufacture and supply of parts of tanks and other armoured fighting vehicles for the Ministry of Defence, Government of India, in respect of bat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way of construction . repair, maintenance or alteration of; a civil structure or any other original works; predominantly for use other than for commerce, industry or any other business or profession. The meaning of original works as per Rule 2A of the Service Tax (Determination of Value) Rules, 2006 includes commissioning of equipment. 14.2 From the above, what emerges is that a service, to be exempted, should be provided to the Government, even by way of repair, maintenance or alteration of, inter alia, any other original works and such service should not be consumed in a commerce, industry or any other business or profession. Here, admittedly, the alleged services of the appellant are provided to the Government, by way of repair / maintenance or alteration of of original works, but the same are definitely not consumed in a commerce, industry or any other business or profession, but exclusively for the Ministry of Defence and hence, we are prima facie satisfied that the scope of the alleged services gets covered under Sl. No. 12(a) ibid. itself. 14.3 The lower authority has rejected the claim of the appellant on the grounds, inter alia, that what was perform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are of the view that the repair and maintenance service, as provided by the appellant in the case on hand, to HVF, Avadi is not amenable to Service Tax under the said category and consequently, the demand to this extent cannot sustain. 15.1 The second issue is the demand of Service Tax on the liquidated damages. We have gone through the following orders of various Benches of the CESTAT wherein the said issue has been settled in favour of the taxpayer: - i. Neyveli Lignite Corporation Ltd. v. Commissioner of Cus., C.Ex. S.T. [2021 (53) G.S.T.L. 401 (Tri. Chennai)] ii. Steel Authority of India Ltd., Salem v. Commissioner [2021 (7) TMI 1092 CESTAT, Chennai] iii. South Eastern Coalfields Ltd. v. Commissioner of C.Ex. S.T., Raipur [2021 (55) G.S.T.L. 549 (Tri. Del.)] iv. M.P. Poorva Kshetra Vidyut Vitran Co. Ltd. v. Principal Commissioner [2021 (2) TMI 821 CESTAT, New Delhi] v. Bharat Heavy Electricals Ltd. v. Commissioner of G.S.T. C.Ex., Tiruchirappalli [2023 (4) TMI 1196 CESTAT, Chennai] (Final Order No. 40311 of 2023 dated 26.04.2023 Service Tax Appeal No. 41500 of 2019 CESTAT, Chennai) vi. Dy. GM (Finance), BHEL v. Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation v. Commissioner of C.Ex., Jaipur [2011 (23) S.T.R. 385 (Tri. Del.)] vi. Bharat Yantra Nigam Ltd. v. Commissioner of C.Ex., Allahabad [2014 (36) S.T.R. 554 (Tri. Del.)] vii. Commissioner of C.Ex., Bhopal v. Western Coalfields Ltd. [2016 (45) S.T.R. 78 (Tri. Del.)] 17. We agree with the contentions of the appellant that the issue was mired in litigation and interpretation of law; the undisputed fact is also that the appellant is a public sector undertaking and hence, there is no scope to allege suppression with an intention to evade tax. Therefore, we hold that the invoking of extended period of limitation is without any justification. 18. In view of the foregoing, we hold as under: - (1) The demand on repair and maintenance / overhauling charges for the period from April 2010 to August 2014 is set aside. (2) The demand on liquidated damages for the periods from July 2012 to March 2015 and April 2015 to March 2016 is also set aside. (3) The invocation of extended period of limitation is held to be not in order. 19. Resultantly, the impugned order is set aside and the appeals are allowed on the above terms, with consequential benefits, if ..... X X X X Extracts X X X X X X X X Extracts X X X X
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