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TMI Blog2024 (9) TMI 1077X X X X Extracts X X X X X X X X Extracts X X X X ..... show cause notice against the respondent. 2. The brief facts of the case are that the respondent are engaged in the business of operation and maintenance of third party boiler plant namely Akimota Thermal Power Station situated at Nanichher, Kutch for generation of electricity owned by M/s. GMDC Limited, a government of Gujarat enterprise. The respondent is a company incorporated under the Companies Act, 1956 and engaged in mining and power generation. As per agreement between M/s. GMDC Limited and the respondent, the contract price is fixed for first year with escalation of 7% year on year basis and there is another clause for penalty and incentives which are as follows : - (I) Long Term Complete Operation & Maintenance Service Agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rials as required for smooth operation & maintenance of power plant (except for steam turbine overhaul). As per the sand agreement, the contract price is Rs. 6,75,390,000 (including Taxes Duties, Transportation & Insurance) for the first year and from the second year onward an escalation of 7% shall be paid year on year basis. 2.1 As per the above terms, whenever Progressive Plant Available Factor (PAF for short) is below 75%, the monthly O&M Fees for service contract shall be correspondingly lowered using a certain formula. Accordingly, in cases where the PAF is below 75%, the fee for O&M service was lowered as per the formula for which the respondent has raised credit notes to M/s. GMDC Limited. The case of the department is that the pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submits that as regards the credit note on account of PAF less than 75%, since the amount reduced from the fixed O&M fees, the same is not part of transaction value hence the same cannot be treated as part of the gross value charged by the respondent to M/s. GMDC Limited. For this reason the same cannot be charged to service tax. He submits that as per Section 67 service tax is levied only on the gross amount charged to service recepient and amount which was not charged, no service tax can be demanded. Therefore, the Adjudicating Authority has rightly dropped the proceedings in this regard. As regards the spares and consumables supplied for service for operation and maintenance of power plant, it is his submission that for this part ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Limited - 2024 (6) TMI 584 - CESTAT Ahmedabad (d) Bright Marketing Company vs. CCE, Coimbatore - 2018 (9) TMI 1592 - CESTAT CHENNAI (e) Bright Marketing Company vs. CCE, Coimbatore - 2023 (10) TMI 114 - CESTAT CHENNAI 5. We have carefully considered the submissions made by both the sides and perused the record. We find that there are two issues arise from the order-in-original to be considered as under:- (i) Whether the credit notes issued on account of lowering of contract price on account of PAF less than 75%, is liable to service tax or otherwise, (ii) Whether service tax is charged on the value of spares and consumables supplied during the course of provision of service of operation and maintenance of power plant of the serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demand of service tax on the value of spares and consumables, we find that the contract is for two transactions one is for service simpliciter i.e. maintenance and operation of power plant and the service charge for the same is fixed only for service and the second limb of contract is for supply of spares and consumables which is nothing but sale of goods. In this fact, the value of spares and consumables cannot be included in the service of operation and maintenance of power plant. As regards the issue of Cenvat credit availed on such spares and consumables, though the order-in-original No. 16/Asst. Commr./2020 dated 03.09.2020 dropped the demand of Cenvat credit but the same was not in the context that whether the Cenvat credit is avail ..... X X X X Extracts X X X X X X X X Extracts X X X X
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