Custom, Excise & Service Tax Tribunal
Veejay Marketing vs Commissioner Of Central Excise & St on 1 February, 2018
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH CHENNAI Appeal No.ST/684/2010 [Arising out of Order-in-Appeal No.66/2010-ST dt. 22.07.2010 passed by the Commissioner of Customs, Central Excise & Service Tax (Appeals), Coimbatore] Veejay Marketing Appellant Versus Commissioner of Central Excise & ST, Coimbatore Respondent
Appearance:
Shri M.Saravanan, Consultant For the Appellant Shri K. Veerabhadra Reddy, JC (AR) For the Respondent CORAM :
Honble Ms. Sulekha Beevi C.S. Member (Judicial) Honble Shri B. Ravichandran, Member (Technical) Date of hearing / decision : 01.02.2018 FINAL ORDER No. 40269 / 2018 Per B. Ravichandran The appeal is against order dt. 22.07.2010 of Commissioner (Appeals), Coimbatore.
2. The appellants are engaged in the manufacture of textile machinery spares. They had received damaged Nipper assembly from M/s.Lakshmi Machine Works Ltd. (LMW), Coimbatore for repair and reconditioning work. They were clearing the same to M/s.LMW, Coimbatore. In certain cases due to defects noticed in the goods by the buyer from LMW, the goods were returned to LMW who in turn gave it to the appellant for due rectification. After rectification and repair, the repaired assembly were supplied back to LMW who dealt with the same later on. The dispute in the present appeal relates to service tax liability of the appellant under the category of Management, Maintenance or Repair Services in terms of Section 65 (64) of the Finance Act,1994. The lower authorities confirmed the service tax liability with penalty.
3. Ld. Consultant appearing for the appellant submitted that they do undertake such repair and maintenance of the goods returned from LMW. Their plea is that as per the arrangements with LMW to carry out such repair and return the goods to LMW who billed the same to their client and for the repair charges discharged service tax under the very same tax entry. Hence service tax on this consideration has been discharged by LMW. Appellant being a sub contractor of such should not be again subjected to tax. The ld.consultant fairly submits that the issue stands settled by the master circular of the Board issue in August 2007. The dispute on tax liability of the sub-contractor has been specifically clarified in the said circular. However, from 1997 onwards, the clarification available was that when the main contractor discharges service tax, there is no liability on the sub contractor. Such being the understanding, the appellant cannot be accused of malafide intent for invoking the demand for the extended period as well as for imposing penalty. Regarding satisfactory proof of service tax paid on the consideration now being taxed has already suffered service tax at the hands of LMW, ld. consultant submitted that they have all the evidence to show that they can establish such payment of tax.
4. Ld. A.R reiterated the findings of the lower authorities.
5. Having heard both sides and upon perusal of appeal records, we note that the impugned order rejected the contention of the appellant regarding payment of service tax on this consideration by the main contractor due to lack of supporting evidence. We note that the tax liability of the sub-contractor for the taxable service cannot be denied as per the legal provisions. The provisions of CCR 2004 is clear to the effect that tax liability will arise on value addition. The concept that the ultimate service provider who used the input service alone is liable to pay tax is against the very principle of Value Added Tax. However, the fact remains that there were clarifications surviving for many years from 1997 issued by the Board. This clarification with reference to non-liability of sub contractor when the main contractor discharges service tax did create bonafide belief on the part of appellant-assessee who acted as a sub contractor. This bonafide belief at best can be a defence against the extended period and penalty. This cannot be defence for non-payment of service tax. We note that in this regard M/s.LMW vide their letter dt. 12.8.2010 clarified that nipper assembly sent by them to the appellants for repair was received back. These reconditioned nipper assemblies were sent to their clients billing the amount as repair charges which included payment of service tax also on labour charges paid to the appellant by LMW. It was further clarified that since service tax was paid by LMW they have requested the appellant not to pay any service tax on such labour charges. It was also further clarified that LMW in fact paid much higher value the service tax. We note that in such circumstances, the demand for extended period cannot be sustained. The appellant shall be liable for service tax for the repair and maintenance charges undertaken by them even in case such labour charges form part of service tax paid by LMW.
6. In view of the above discussion, the impugned order is set aside to the extent indicated above. Appeal is partly allowed with consequential relief, if any as per law.
(dictated and pronounced in court)
(B. Ravichandran) (Sulekha Beevi C.S)
Member (Technical) Member (Judicial)
gs
7
Appeal No.ST/684/2010