Custom, Excise & Service Tax Tribunal
Clp Power India Pvt Ltd vs Commissioner Of Service Tax, Mumbai on 1 June, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. ST/196, 279/12, ST/CO/62,80/12 [Arising out of Order-in- Original No. 23/ST/SB/2011-12 dated 15-2-2012 & No. 10/ST/SB/2011-12 dated 10-1-2012 passed by the Commissioner of Service Tax, Mumbai-II] For approval and signature: Honble Mr Ramesh Nair, Member(Judicial) Honble Mr. C.J. Mathew, Member(Technical) =======================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : seen
of the Order?
4. Whether Order is to be circulated to the Departmental: Yes
authorities?
=======================================================
CLP Power India Pvt Ltd.
:
Appellant
VS
Commissioner of Service Tax, Mumbai
:
Respondent
Appearance
Shri. Tarun Jain, Advocate with Shri. Bhupendra Singh, Advocate for the Appellants
Shri. D. Nagvenkar, ADC (A.R.) for the Respondent
CORAM:
Honble Mr Ramesh Nair, Member(Judicial)
Honble Mr. C.J. Mathew, Member(Technical)
Date of hearing: 1/6/2016
Date of decision: 1/6/2016
ORDER NO.
Per : Ramesh Nair
The fact of the case is that appellant has entered into agreement with M/s. Gujarat Paguthan Energy Corporation Ltd(GPEC). which earlier known as Gujarat Torrent Energy Corporation Ltd to operate and maintenance of their power plant situated at Baruch Gujarat and for such operation and maintenance the appellant received lumpsum amount in consideration from M/s. GPEC. This lumpsum consideration was divided into two parts in ratio 55:45 representing consideration for operation and maintenance respectively. Appellant has been paying service tax on maintenance charges w.e.f. 16-6-2005 under Management Maintenance or Repair Service but did not pay service tax on operation charges. In the adjudication, the Adjudicating authority has confirmed the demand of service tax on the charges for operation of the plant under the head of Management, Maintenance or Repair Service. Being aggrieved by the impugned order, appellant filed this appeal.
2. Shri. Tarun Jain, Ld. Counsel along with Shri. Bhupendra Singh, Ld. Advocate appearing on behalf of the appellant submits that the issue has been considered in various judgments and settled that operation of plant does not liable for service tax under Management, Maintenance or Repair Service as the same is not taxable. In this regard he placed reliance on following judgments:
(a) CMS Operation and Maintenance Co. Pvt Ltd. Vs. CCE[2007(7) STR 369(T)]
(b) Rolls Royce Industrial Power(I) Ltd Vs. CCE[2006(3)STR292(T)]
(c) Basti Sugar Mills Co. Ltd Vs. CCE[2007(7) STR 431(T)]
(d) Commissioner Vs. Basti Sugar Mill Co. Ltd[2012(25) STR J154(SC)]
(e) Inox Air Products Ltd. Vs. CCE[2015 (38) STR 90(T)]
(f) CST-Mum-II Vs. Global S.S. Construction Pvt Ltd[2016-VIL-240CST-MUM-ST
(g) CEST-Mum-IIVs. Polydrill Engineers Pvt Ltd [2016-VIL-263 CST-MUM-ST
(h) CST-Mum-II Vs. Evonik Energy Servcies [2016-VIL-265 CST-MUM-ST]
3. On the other hand, Shri. D. Nagvenkar, Ld. Addl. Commissioner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order.
4. We have carefully considered the submissions made by both the sides.
5. We find that the appellant have entered into two agreements, one is for operation of plant and other is for maintenance of the same. The appellant has admittedly discharged the service tax on maintenance of plant. As regard the operation of the plant, the issue has been settled in various judgments relied upon by the Ld. Counsel, Charges for operation of plant is not liable to service tax under the head of Management, Maintenance or Repair Service. Relevant portion of some orders are reproduced below:
CMS Operation and Maintenance Co. Pvt Ltd.
27.?The order impugned in Appeal No. S/143/06 found the services rendered by CMS to be also Business Auxiliary Service and Maintenance or Repair service. As per the definition in the Act, Business Auxiliary Services means any service in relation to :-
(i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or
(ii) promotion or marketing of services provided by the client; or
(iii) any customer care service provided on behalf of the client; or
(iv) procurement of goods or services, which are inputs for the client; or
(v) production of goods on behalf of the client; or
(vi) provision of service on behalf of the client; or
(vii) a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customers or vendor, public relation services, management or supervision and includes services as a commission agent, but does not include any information technology service and any activity that amounts to manufacture within the meaning of clause (f) of Section 2 of the Central Excise Act, 1944. As per this definition, any activity involving manufacture of any goods within the meaning of clause (f) of Section 2 of the Central Excise Act, 1944 is not subject to tax under the head Business Auxiliary Service. It is a settled position that electricity is goods manufactured in the sense envisaged in clause (f) of Section 2 of the Central Excise Act, 1944. The Honble High Court of Orissa in Orient Paper & Industries Ltd. v. Orissa State Electricity Board (supra), had upheld imposition of Central Excise duty on electricity, electricity being manufactured goods as defined in the Central Excise Act 44. Therefore, we find that the argument of the appellants that the services involved are not liable to tax as Business Auxiliary Service has to be accepted. Such an activity is not covered bys Business Auxiliary Service.
28.?As regards Repair or Maintenance Services, the argument of the appellants that they maintained only the plant and the taxable service of maintenance or repair of goods/equipment covered by the Act were done by the suppliers of the equipment under warranty or Annual Maintenance Contract (AMC) is reasonable and merits acceptance. If the appellants undertook these activities they had rendered the service to themselves and not to another person. Therefore no liability is incurred by the appellants on this account.
29.?A works contract for manufacture of an item as prescribed in Section 2(f) of the Central Excise Act, 1944 cannot be vivisected to charge tax on some part of the activities involved. In our considered view, this is what the lower authorities have done in the cases covered by both the appeals. Moreover, in the first appeal there is demand on different activities of the O&M contractor categorized as Management Consultant, Consulting Engineer and Clearing and Forwarding Agent without giving the taxable value in each case. We find that tax cannot be levied when the liability of the assessee is not determined precisely with respect to each of the taxable services found to have been rendered. No tax can be levied without specifying taxable value.
30.?In the impugned order the Commissioner had rendered a finding that the facility was run by entering into contracts with different organizations such as CMS who had contracted to undertake the operation and maintenance of the facility. He found that though CMS was operating the facility for generating electricity, the entire activity was carried on by CMS on behalf of ST-CMS. The Commissioner also observed : the agreement also provides for incentive payments/liquidated damages/environmental fines...... This does not happen when any agency provides service to another. A service provider is not responsible to achieve any performance target referring to which it becomes entitled to any reward or incurs penalties. Such provisions in the O&M contract fortify our finding that the appellants were not rendering any advisory services and were engaged in activities which could be measured such as generation of power in the instant case.
31.?We have seen that in generating power, the appellant did not render any advice to improve the functioning of the working system of another organization. They ran the facility and organized the required materials through the owner and services of their own staff. These activities did not constitute services to any other person/organisation. These impugned functions were incidental to their main activity of producing power. The O&M contract is a works contract and it is bad in law to vivisect it and tax certain activities covered by the contract. A reading of the whole contract makes it plain that the same was intended to ensure generation and supply of power as per PPA and not for rendering any service to the owner.
32.?As we have decided that the appellants did not render any taxable service we do not think it is necessary to examine the question relating to valuation of the impugned services or the question whether the demands were made in time. Accordingly we allow both the appeals.
Rolls Royce Industrial Power(I) Ltd
3.?We have perused the records and have heard both sides. Learned Counsel representing the appellant took us through the clauses in the agreement to show that the appellants contract was not for rendering any service but for performing a job. The job in question was operating and maintaining the plant. It was emphasized that the payment was also on that basis. Provisions for bonus payment in case of operating the plant beyond the stipulated load factor and penalty for operating the plant below the stipulated load factor, makes this clear. In the course of operating and rendering the plant, the appellant was not giving any consultancy. They merely kept record and reported the results and other details of the operation. According to the appellant, that was again merely a report of performance and not any advice for consultancy. The initial agreement was for a period of operation of 5 years and the agreement also provided for renewal of the agreement.
4.?The learned Counsel for the appellant also pointed out that the legal position in this matter remained settled in favour of the appellant by the decision of this Tribunal in the case of Daelim Industrial Co. Ltd. v. Commissioner of C. Ex. Vadodara - 2003 (155) E.L.T. 457 wherein the Tribunal held that a work contract cannot be considered as a consultancy contract. Nor can it be vivisected and part of it subjected to service tax.
5.?As against the aforesaid contention of the learned Counsel of the appellant, learned SDR has pointed out that operating and maintenance of the plant involved rendering of engineering advice. She has also submitted that the proposition that a work contract cannot be divided would not be valid in view of the 46th Amendment of the Constitution enlarging definition of sale to include deemed transfer of property/goods involved in a work contract and the judgment of the constitution bench of the Supreme Court in the case of Builders Association of India and Others v. Union of India and Others (Sales Tax Cases Vol. 73 - 37). The learned SDR also relied on the decision of this Tribunal in the case of CCE, Shillong v. Rabindra Das - 2003 (158) E.L.T. 487 wherein this Tribunal held that functions performed by the assessee such as planning of building, preparation of land map, preparation of ground plan of factory, stability certificate, installed capacity assessment etc. comes within the ambit of consulting engineer.
6.?We have perused the records and considered the submissions made by both sides. The issue raised is the true meaning and scope of operation and maintenance agreement dated 14-3-95. The appellant had taken over the plant and was operating & maintaining it in terms of the agreement. A perusal of the agreement makes it clear that it is a contract between owner and an operator. The terms of the contract vest complete freedom and responsibility on the appellant, without any interference by the owner. The owners right is restricted to entry and access, to be satisfied that the operation is carried out according to standards. He also receives reports about the relevant aspects of operation, status and output. The payment for operation and maintenance are determined under the various clauses of the contract. In addition to the lump sum payment, it also provides for bonus and penalty. The terms of the contract do not envisage or involve providing any consulting or engineering help to the owner. The operator is fully autonomous and responsible for the performance of operation and maintenance. Whatever engineering issues are involved, it is for the operator to find solutions for, and attend to in the course of operation and maintenance. He is not required to render any advice or to take any orders from the owner. He cannot pass on the responsibility for operating the plant in any manner to the owner. Thus, there are no two parties, one giving advise and the other accepting it. Service tax is attracted only in a case involving rendering of service, in this case, engineering consultancy. That situation does not take place in the present case. Therefore, we are of the opinion that the duty demand raised is not sustainable. The learned SDRs contention about the 46th Amendment and the Apex Courts decision in Builders Association of India and Others (supra) have no application in the present case since such a deemed definition does not exist in the case of job work as has taken place in regard to project contracts in sales tax. In these facts and circumstances, the appeal is allowed after setting aside the impugned order.
Basti Sugar Mills Co. Ltd
5.?The perusal of the above clauses make it clear that under the agreement with Indo Gulf Industries Ltd. the appellant has been entrusted the operation of the factory (Clause 1). The remaining clauses of the agreement are to enable the appellant to perform the operation of the factory smoothly and well. The agreement is not for any advice or consultancy.
6.?The definition of management consultant under the taxing statute may be noted :-
Management Consultant means any person who is engaged in providing any service, either directly or indirectly, in connection with the management of any organization in any manner and includes any person who renders any advice, consultancy, devising, development, modification, rectification or upgradation of any working system of any organization.
7.?The above definition makes it clear that what is envisaged from a consultant is advisory service and not the actual performance of the management function. In the present case, the appellant was in-charge of the operation of the factory and thus was performing the management function.
8.?An ocean separates a manager from a management consultant, a performer from an advisor or a coach. That ocean exists in the present case also. We dealt with a similar case in Rolls Royce Industries Power (I) Ltd. (Supra) and held that where the agreement conferred operational autonomy and responsibility on the contracted party, the relationship is not one of consultancy. The ratio of that decision covers the present dispute also. There is no management consultancy in the facts of the present case and the demand is clearly beyond the scope of the statute.
9.?In the result, the impugned order is set aside and the appeal is allowed with consequential relief to the appellant.
The above judgment is upheld by the Honble Supreme Court.
Global S.S. Construction Pvt Ltd
3. On perusal of records, it transpires the issue that falls for consideration is whether the respondent herein has provided the services of maintenance or repair for the period prior to 01.05.2006 and for the subsequent period under Management, Maintenance or Repairs services during the period 2005-06 to 2009-10. 4. The respondent herein had entered into a contract with M/s ONGC for operation of cooling water system, operation of raw water plant at Hazira Plant, operation of MP boilers & operation of IG plant & compressed Air system. It is the case of Revenue that respondent had provided services under Management, Maintenance or Repairs services, hence the same has to be taxed. 5. The findings of the adjudicating authority while dropping the proceeding initiated by show-cause notice are very relevant, which are reproduced. 3.1 A perusal of all the four contracts executed by assessee for providing service to M/s ONGC who have hired the services of the noticee for operation of Cooling Water System, Operation of Raw Water Treatment at Hazira Plant, Operation of MP Boilers & Operation of IG plant & Compressed Air System reveals that as per terms of said contracts, M/s ONGC had agreed to pay fixed amount per month to the Noticee for operating the said plants as per terms and conditions contained in the said contracts. All the four contracts have been executed more or less on similar terms and conditions except the monetary consideration which varies from plant to plant. On perusal of scope of work as http://www.vatinfoline.com/data/SERVICE TAX/2016/2016-VIL-240... 1 of 3 9/29/2016 12:00 PM defined in the said contracts and as discussed in detail vide para 1.6 above, it is observed that the principal job entrusted to the Noticee is in connection with smooth Operation of Plant without any breakdown. For obtaining desired results, M/s ONGC have laid down certain conditions as per para 2 of the contract (Scope of Work). The contracts clearly indicate that the fees or service charges fixed were only in relation to operation of plant. The contracts do not contain any clause that may suggest that the noticee was required to provide any service relating to Management, Maintenance or Repair to M/s ONGC. The contracts also do not contain any clause regarding payment of any fees/charges /consideration to be paid to the notice towards Management, Maintenance or Repair. As per the scope of said contracts the Noticee is not required to provide any other service to ONGC except Operation of Plant. 3.1.1 The principal obligation cast upon the Noticee under the said contracts is to operate the plant/system including attending to all the incidental contingencies arising in day to day administration. The Noticee is under contractual obligation to employ required personnel including Engineers/Technicians/Coordinators required for smooth operation of plant. The personnel employed by the Noticee for operating the plant of ONGC were not required to provide any, service directly to ONGC. The terms of contract entered into between the Noticee and M/s ONGC clearly indicate that the main function of the Noticee is to operate the plant. The contracts do not contain any clause under which the Noticee is assigned the work relating to Management, Maintenance or Repair. The; running maintenance of mechanical equipments during operation of plant is only an ancillary activity to the main activity of Operation of Plant. As per contractual obligations, the Noticee is neither required nor expected to provide any service to M/s ONGC in respect of Management, Maintenance Or Repair of any other equipment except the equipment which is used for Operation of Plant. The contracts involve some other minor functions/activities as underi) Monitoring of lube oil level in rotary equipment, ii) Running maintenance of mechanical equipments in work areas, iii) Dechoking, depressurizing, air blowing and inertisation of pipelines and tanks as and when required, fixing connection of hoses, cleaning of pipes/drainage under plant premises of the area, attending leakages on flanges including tightening of bolts, plugs etc. iv) Operation of battery limit valves of the work area, dosing of chemicals/special chemicals, preparing documents for Cooling Water Systems in given formats, providing calculation devise to shift operational staff for computation and process control and keeping/disposing of scrap material/cotton waste/mechanical parts etc. The above functions are performed by the Noticee as part of their main function of Operation of Plant. None of the above functions are performed in isolation and as such are classifiable as part of the main function i.e. Operation of Plant. The above functions are not performed independently and hence cannot be classified independently. 3.3.2 The Boards Circular F. No. 334/4/2006 TRU, dated 28/02/2006 and 334/1/2008/TRU, dated 29.02.2008 presented by the noticee have been seen. It is found that the Board has taken a consistent view that a composite service, even if it consists of more than one service, should be treated as a single service based on the main principal service and accordingly classified. The guiding principal in deciding on question of facts and law is to identify the essential features of the transactions. Classification of a composite service is based on that component of the service which gives essential character. In case of a transaction containing major and ancillary elements, classification is to be determined based on the essential features or dominant elements of the transaction. In view of the Board's guidelines, the dominant nature of service provided by Noticee is that of Operation of Plant of ONGC and the scope of other work contained in the contracts are the functions which are in the nature of ancillary elements to operate the plant. It is thus established that the main or principal service provided by Noticee is 'Operation of Plant' of M/s ONGC and merits classification under Business Support Service as per enlarged scope of Business Support Service with effect from 01.05.2011. The above conclusion is duly supported by various case laws cited by the Noticee. 3.3.3 Once it is established that the service provided by Noticee is covered under Business Support Service, the said service cannot be classified under the category of 'Management, Maintenance or Repair Service'. The scope of Business Support Service was enlarged vide Finance Act, 2011 with effect from 01-05-2011 so as to include Operational or Administrative assistance in any manner. The activity of Operation of Plant is covered under the enlarged scope of Business Support Service which came into effect from 1-05-2011, and hence classifying the said activity/service under any other category of service prior to 1-05-2011 would not be correct & legal. Observation made by the http://www.vatinfoline.com/data/SERVICE TAX/2016/2016-VIL-240... 2 of 3 9/29/2016 12:00 PM Hon'ble High Court Bombay in the case of Indian National Ship Owner Association Vs. Union Of India [2009 (14) STR 289 BOM] that introduction of new entry and inclusion of certain services in that entry, would presuppose that there was no earlier entry covering the said services is squarely applicable in this case. Ratio of other judgments relied upon by the Noticee also are found to be applicable in the instant case. It is seen that as against above reproduced factual finding, the appeal filed by the Revenue is not contradicting the factual matrix. The grounds of appeal is basically persisting on the argument that the action of the respondent is management of immovable property. We find that the finding recorded by the adjudicating authority are correct as nothing is brought to or notice which indicates that the respondent were engaged for and doing Management Maintenance or Repairs services. 6. In view of the foregoing, we hold that the impugned order is correct and legal and does not suffer from any infirmity. The appeal is rejected.
Polydrill Engineers Pvt Ltd
7. Undisputedly, the respondent has been awarded a contract for operation of the bulk handling plant of ONGC on a consideration for producing desired quantum of work. The said agreement also provided for regular, periodical inspection maintenance or repair and other activity to be done by the respondent. It is the case of the revenue that this activity of the respondent could fall under the category of maintenance or repair services prior to 01-05-2006 and subsequently under management maintenance or repair services. In our considered view, the lower authorities are in error to come to such a conclusion. The definition that falls under our consideration is reproduced below: Prior to 16-06-2005 Section 65(64):- maintenance or repair means any service provided by- (v) any person under a maintenance contract or agreement; or (vi) a manufacturer or any person authorized by him, in relation to a maintenance or repair or servicing of any goods or equipment, excluding motor vehicle; W.E.F. 16-06-2005 Section 65(64):- maintenance or repair means any service provided by- (vii) any person under a contract or any agreement; or (viii) a manufacturer or any person authorized by him, in relation to- (a) maintenance or repair including reconditioning or restoration, or servicing of any goods or equipment, excluding motor vehicle; or (b) maintenance or management of immovable property. W.E.F. 01-05-2006 Section 65(64):- management, maintenance or repair means any service provided by- (ix) any person under a contract or any agreement; or (x) a manufacturer or any person authorized by him, in relation to- (a) management of properties, whether immovable or not; (b) maintenance or repair of properties, whether immovable or not; or (c) maintenance or repair including reconditioning or restoration, or servicing of any goods or equipment, excluding motor vehicle. Section 65 (105) (zzg) - taxable service means any service provided or to be provided to any person, by any person in relation to management, maintenance or repair and the term service provider shall be construed accordingly. It can be seen from the above reproduced definition prior 01-05-2006 to attract service tax liability under maintenance or repair service, there has to be a contract for doing so and it should be given by manufacturer or any person authorized to do so. In the case in hand, the definition will not apply as the maintenance or repair service are not for management or repair service, but these are consumed by them for smooth functioning of bulk handling plant. 8. As regards the tax liability for the subsequent period from 01-05-2006, we find that the bulk handling plant was handed over by ONGC to respondent for operation and completing the contract to ONGC in rendering such activities, the respondent undertakes the maintenance or repair services which in our view are for self and the services of management maintenance or repair are not attracted as the same is not provided to any client. It is to be further noticed from reading of the scope of work as per agreement, principal job entrusted to respondent is in connection with smooth operation of bulk handling plant for obtaining desired results from the bulk handling plant. The agreement between ONGC and respondent does not indicate that respondent was required to provide any service relating to Management, Maintenance or Repair Services to ONGC, nor does the agreement indicate any separate fees is to be http://www.vatinfoline.com/data/SERVICE TAX/2016/2016-VIL-263... 2 of 3 9/29/2016 12:02 PM paid to respondent for Management, Maintenance or Repair Services. In order to overcome this lacuna, government has enlarged the scope of services under Business Support Services w.e.f. 01-05-2011 by including services in respect of Operational or Administrative assistance in any manner which may cover the operation of plant. Since these services were w.e.f. 01-05-2011 under Business Support Services, it is not taxable under Management, Maintenance or Repair Services for earlier period. 9. Our above said view is fortified by the ratio by decision of the Tribunal in the case of CMS (I) Operations and Maintenance Co. Pvt. Ltd. - [2007 (7) STR 369 - 2007-VIL-36-CESTAT-CHE-ST], we reproduce the said ratio: as regards Repair or Maintenance Services, the argument of the appellants that they maintained only the plant and the taxable service of maintenance or repair of goods/equipment covered by the Act were done by the suppliers of the equipment under warranty of Annual maintenance Contract (AMC) is reasonable and merits acceptance. If the appellants undertook these activities they had rendered the service to themselves and not to another person. Therefore no liability is incurred by the appellants on this account. 10. In view of the foregoing in facts of this case, we hold that the impugned order is correct, legal and does not suffer any infirmity. The appeal filed by the revenue is rejected.
Evonik Energy Services
7. The issue to be decided in this case is whether the appellant has correctly discharged the service tax liability under the category of Management Maintenance and Repair Services or otherwise and whether he is eligible for the refund of the service tax paid under the mistake of law or otherwise. 8. It is undisputed that the respondent assessee and HPLCL entered into agreement for operation and maintenance of power plant. The terms of the agreement were considered by us and we find that the entire agreement talks about operation of the power plant for generation of electricity and incidentally also maintain the same by way of annual Maintenance and Repair to the plant for operations. 9. The First Appellate Authority after considering the facts of the case in his impugned order recorded the following findings. "23. All said and done, the Adjudicating Authority has nowhere denied the fact that the Operator i.e. the appellants contract with the owner is to operate the power plant for generation of energy and not merely to maintain it. The appellants contention is that the management or maintenance of the plant was only incidental to the activity of operating the power plant to generate electricity and steam. The Adjudicating Authority, while conceding to the fact that services rendered by the appellants were wrongly classified under Consulting Engineer as they did not provide any such service. But he (Adjudicating Authority) has jumped on to his hurried conclusion that as per their Agreement entered with the owner, they had provided the service of Management Maintenance and Repair Services as defined under Section 65 of the Finance Act, 1994 and that the appellants claim that their services are not covered under Service tax is not correct and therefore not acceptable. 24. I do not find any merit in the Adjudicating Authoritys above contentions. For the sake of illustration, I may observe that if someone hires a driver to drive ones vehicle; the drivers prime duty is to drive the vehicle though its cleaning, maintenance, proper up-keep etc. will be incidental to his prime duty of driving the said vehicle. Same way, the appellants contract with the owner under the impugned O&M Agreement dated 30.06.2006 is to Operate the plant in accordance with an operating regime indicated by the Owner, including enhanced operations as per Schedule 13. Besides, they are obliged to Maintain the plant in a manner such as to maximize the efficiency, output, availability, and starting and operational reliability of the Plant, minimize the heat rate, downtime, forced outages, fuel consumption and losses (evaporation or otherwise), including performance of scheduled inspections and overhauls of the plan. The appellants are required to maintain the plant in such a manner to prevent wastages, theft, pilferage and shortages etc. from the plant. One cannot infer that the appellants had entered into the aforesaid O&M Agreement with the Owner exclusively to maintain, manage or repair their Power Plant. 25. In find ample support from the Honble CESTATs decision in the case of CMS (India) Operations & Maintenance Co. P. Ltd. vs. CCE Pondicherry 2007 (7) STR 369 (Tri-Chennai) - 2007-VIL- 36-CESTAT-CHE-ST wherein para 31 it is clearly held that :- 31. We have seen that in generating power, the appellant did not render any advice to improve the functioning of the working system of another organisation. They ran the facility and organised the required materials through the owner and services of their own staff. These activities did not http://www.vatinfoline.com/data/SERVICE TAX/2016/2016-VIL-265... 2 of 3 9/29/2016 12:02 PM constitute services to any other person/organisation. These impugned functions were incidental to their main activity of producing power. The O&M contract is a works contract and it is bad in law to vivisect it and tax certain activities covered by the contract. A reading of the whole contract makes it plain that the same was intended to ensure generation and supply of power as per PPA and not for rendering any service to the owner. 26. I, therefore, hold that the subject activity of the appellants regarding operating the power plant for generation of energy cannot be classified as services of Management, Maintenance or repairs and as such no service tax was leviable thereon under this category of taxable service during the period under reference. The leviability of tax under Consulting Engineering Service is already ruled out by the department itself as pointed out supra. Hence, refund of service tax is held to be admissible on its merit. 27. So far as the question of unjust enrichment involved in the present refund claim is concerned, I may agree with appellants contention that in terms of Article 6.3.3 of the O&M Agreement. The operator free payable for each operating year was inclusive of the Operators Income Tax and any and all other taxes as applicable on such free but was exclusive of service tax at the rates as applicable on such fee at the time of invoicing such fee. Such service tax shall be shown and claimed separately by the operator. No doubt, the appellants have admittedly charged the element of service tax separately in their invoices issued to the owner from time to time but this amount has not been charged/ realised from any other person save and except an amount of Rs. 3,36,278.00. This fact has been duly disclosed by the appellants in their refund claim in Form-R submitted to the Assistant Commissioner of Service tax, Division-IV, Mumbai and further admitted in course of personal hearing held on 10.10.2012 before me. Therefore, the refund claim for a total sum of Rs. 24,09,838.00 becomes allowable to the appellants. However, a sum of Rs. 3,36,278.00 merits to be credited to the Consumer Welfare Fund as refund thereof to the appellants in the given circumstances would constitute unjust enrichment. 10. As against the above reproduced factual finding by First Appellate Authority it is to be noted that the grounds of appeal as taken by the revenue in the appeal memorandum are nowhere contradicting the factual position as stated by the First Appellate Authority. It is also to be noted that the First Appellate Authority has correctly come to a conclusion that the similar issue has been decided by the Tribunal in the case of CMS (India) Operations & Maintenance Company (supra). Further, we also note that identical view has been taken by this bench in the case of CST vs. Polydrill Engineers P. Ltd. in Order no. A/86518/16/STB - 2016-VIL-263-CESTAT-MUM-ST. 11. We agree with the contention raised by the ld. Counsel that the reclassification of the services as sought by the Adjudicating Authority in a refund claim filed by the assessee seems to be incorrect appreciation of the law. In our view if the Revenue authorities were holding a view that the services rendered by the respondent assessee would be correctly classified under Management Maintenance and Repair Services they should have issued a show-cause notice for doing it so. Revenue authorities cannot reclassify the services rendered by the respondent assessee in a refund claim filed by the respondent. 12. In view of the foregoing, we hold that the impugned order is correct, legal and does not suffer from any infirmity. The cross objection filed by the respondent assessee being in support of the said impugned order is also disposed of. 13. We uphold the impugned order and reject the appeal From the above judgments, it can be seen that activity of operation of plant does not fall under category of taxable service in the head of management, maintenance and repair service. In the present case, admittedly there are two agreements into existence, one is clearly for operation of power plant and second is for maintenance on which appellant discharged the service tax. The agreement of operation of plant is neither involved any management of either plant or maintenance or repair. Entire plant was taken over by the appellant for operation. Therefore the same does not fall under Management, Maintenance or Repair service. As per our above discussion as well as settled legal position on the identical issue as per the above judgments, we are of the view that the impugned order is not sustainable therefore the same is set aside. Appeals are allowed. Revenues COs also stand disposed of.
(Operative part pronounced in court) C.J. Mathew Member (Technical) Ramesh Nair Member (Judicial) sk 22 ST/196, 279/12 ST/CO/62,80/12