Custom, Excise & Service Tax Tribunal
Cce Wardha vs Gaurav Heavy Engineering (I) Pvt. Ltd on 29 August, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT No. I
APPEAL No. ST/86163/2015
ST/CO/91198/2015
(Arising out of Order-in-Appeal No. NGP/EXCUS/000/APP/226/14-
15 dated 22.12.2014 passed by Commissioner of Central Excise,
Customs & Service Tax (Appeals), Nagpur)
Commissioner of Central Excise, Wardha Appellant
Vs.
Gaurav Heavy Engineering (I) Pvt. Ltd. Respondent
Appearance:
Shri Dilip Shinde, Assistant Commissioner (AR), for appellant None for respondent CORAM:
Hon'ble Dr. D.M. Misra, Member (Judicial) Hon'ble Mr. Sanjiv Srivastava, Member (Technical) Date of Hearing: 29.8.2018 Date of Decision: 29.8.2018 ORDER No. A/87217/2018 Per: Sanjiv Srivastava This is an appeal filed by the revenue challenging the order of Commissioner (Appeal). In the appeal, appellant is claiming following relief:
"to set aside the Order in Appeal No NGP/EXCUS/000/APP/226/14-15 dated 22.12.2014
passed by the Commissioner (Appeal) Customs And
2 ST/86163/2015 ST/CO/91198/2015 Central Excise, Nagpur to the extent of Rs 40,39,101/- in so far as it relates to differential payment of Service Tax." 2.1 Respondents in the present case engaged in providing taxable service under the category of "Management, Maintenance or Repair Service" as defined under Section 65(64) and 65(105)(zzg) of the Finance Act, 1994. In respect of certain taxable services provided to M/s WCL Chandarpur, it was observed that respondents had paid service tax at a lower rate under the composition scheme under "Work Contract Services". Issue was taken up and matter adjudicated by the Additional Commissioner holding that the services provided by the respondent were correctly classifiable under category of "Management, Maintenance or Repair Service" an benefit of composition scheme was not available to respondents. Accordingly he confirmed the demand of Rs 40,39,101/- along with interest as applicable. He also imposed a p[enalty of Rs 40,39,101/- under Section 78, Rs 10,000/- under Section 77 and Rs 20,000/- under Rule 6 read with Section 70 of the Finance Act, 1994. 2.2 On appeal Commissioner (Appeal) has by a very detailed order decided as follows:
"I The classification of the services rendered by the appellant is ordered to be classified under the category of
3 ST/86163/2015 ST/CO/91198/2015 "Management, Maintenance or Repair Service" as provided under Section 65(64) and 65(105)(zzg) of the Finance Act, 1994 during the period of demand. II. The amount of service tax already paid by the appellant at the composite rate of 4% during the period of demand (amounting to payment opf service tax at 12% on the abated value of 33%) during the period of demand is ordered to be appropriated against the service tax payable by the appellant during the demand period under as defined under Management, Maintenance or Repair Services.
III The demand confirmed by the lower authority in the impugned order is set aside.
iv. Penalty of Rs 10,000/- imposed under section 77 of the Finance Act, 1994 for wrong classification of taxable service is upheld.
v. Penalty for delayed filing of return, if any, is to be imposed as per provisions of Rule 7C of the Service Tax Rules, 1994 provided that the total amount payable in terms of this rule, for delayed submission of return, shall not exceed the amount specified in section 70 of the Act which is Rs 2,000/- upto Rs 08/04/2011 and Rs 20,000/- thereafter."
4 ST/86163/2015 ST/CO/91198/2015 2.3 Aggrieved by the order department has filed this appeal. Respondents have in this case filed cross objections to the appeal filed by the department. 3.0 From the appeal memo it is quite evident that department is in appeal only for setting aside of the order of Commissioner (Appeal) to the extent it relates to payment of differential duty. The ground specified in the appeal memo being that-
i. Works Contract (Composition Scheme for payment of service Tax) Rules, 2007, effective from 1.6.2007 is not applicable as the services provided are not "Work Contract Services";
ii. Abatement under Notification No 1/2006 dated 1/03.2006 is not admissible as the services provided namely "Management, Maintenance or Repair Service" rae not specified services under the notification;
iii. Notification No 12/2003-ST dated 20.06.2003 is not admissible as the benefit under this notification is admissible subject to fulfillment of the conditions specified in the notification. Since these conditions are not fulfilled in the present case the benefit under this notification is not admissible.
iv. In support they relied upon following decisions-
5 ST/86163/2015 ST/CO/91198/2015 a. Safety Retreading Company (P) Ltd Vs Commissioner Central Excise, Salem [2012 (26) STR 225 (T-Chennai) b. Laxmi Tyre Vs Commissioner Central Excise Pune [2014 (36) STR 364 (T-Mum)] c. Idea Mobile Communication Ltd Vs Commissioner Central Excise Cochin [2011 (23) STR 433 (SC)] d. Indian Coffee Worker's Co-op Society Ltd. Vs Commissioner Central excise and Service Tax [2014 (34) STR 546 (ALL)] 3.1 Arguing for the Appellant Shri Dilip Shinde Assistant Commissioner Authorized Representative, submitted that the present appeal has been filed by the revenue against that part of the order of Commissioner (Appeal) by which it can be said that the if Service Tax paid availing benefit of composition, if offset against the demand of Service Tax after allowing the benefit of Notification No 12/2003-ST would, the tax liability will be nil. He relied upon the decisions referred in the appeal and stated that Appellant is not eligible for benefit of Notification No 12/2003-ST as the value of goods/ material sold while providing the said taxable services has not been shown separately on the invoices. In his submissions he argued in favour of revenue 6 ST/86163/2015 ST/CO/91198/2015 appeal and contended that for this reason the appeal of revenue should be allowed.
3.2 None appeared for the respondents despite notice. However the submissions made by the respondents in the cross objections are taken as submissions for deciding the appeal.
4.0 The only issue that needs to be considered is whether the benefit under Notification No 12/2003-ST would be admissible to the appellant for determining the tax payable under the category of "Management, Maintenance or Repair Service" as defined under Section 65(64) and 65(105)(zzg) of the Finance Act, 1994.
5.0 Notification No 12/2003-ST reads as follows:
"In exercise of the powers conferred by section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts so much of the value of all the taxable services, as is equal to the value of goods and materials sold by the service provider to the recipient of service, from the service tax leviable thereon under section (66) of the said Act, subject to condition that there is documentary proof specifically indicating the value of the said goods and materials."
7 ST/86163/2015 ST/CO/91198/2015 6.1 CESTAT has in case of Wipro GE Medical SSystems Pvt Ltd Vs Commissioner Service Tax Bangalore [20109 (14) STR 43 (T-Bang) held as follows:
7. The learned Departmental Representative stated that the contract is only for the annual maintenance and the consideration received is only for the maintenance and repair. The replacement of spare parts is only incidental and there is actually no sale of the goods involved. Therefore, she supported the order-in-original and stated that the Order of the Commissioner is in accordance with law and the appellants are liable to pay service tax on the gross receipts. She also invited our attention to the Commissioner's order wherein he has relied on the Board's Circular dated 3-3-2006 according to which the appellants could have availed of the abatement only after producing the documentary evidence. She stated that there is actually no documentary evidence for the abatement claimed. This 30% : 70% appears to be arbitrary. In this view of the above, she requested the Bench to uphold the order of the Commissioner of Service Tax.
8. On a very careful consideration of the fact, we find that there is no dispute with regard to the leviability of service tax on the maintenance and repair services. The main point of dispute is with regard to the valuation. However, Section 67 of the Finance Act clearly provides for the abatement of the value of the goods sold in the course of the carrying out of the service. The point is whether the goods are actually sold. According to the department, the contract is only for the maintenance and repair. Therefore, it cannot be said that the spare parts were sold. This view is not correct. The chartered accountant has actually given a certificate with regard to 8 ST/86163/2015 ST/CO/91198/2015 the consumption of materials. It is also not denied that in the course of the maintenance no material was used. In several decisions it has been held that service tax cannot be levied on that portion of the value on which sales tax has been charged. This position has been elaborately dealt with in the decision of the Shilpa Colour Lab case decided by this Bench and cited supra. This view has been affirmed in many decisions. Once, the sales tax has been paid on the materials, then on the same service tax also cannot be charged. In fact, the appellants had relied on the decision of the Hon'ble Karnataka High Court which has been upheld by the Hon'ble Supreme Court. In the Modi Xerox case it has been clearly held that in the Annual Maintenance Contract, the replacement of spares etc. would be considered as sale. Even in the present case, on 70% of the value sales tax has been paid and this has been accepted by the Government of Karnataka. This fact also cannot be ignored. Moreover, Notification No. 12/2003 dated 20-6-2003 clearly provides for exempting the value of the materials sold during the provision of the service. Whenever, any service is provided if in the course of the provision of the service certain materials are used they will definitely be considered as sale. This is clearly covered by the Constitutional Article 366 (29) (B) cited by the learned Advocate. We do not agree with the learned Commissioner that the said Constitutional provision has no application here. The Maintenance and Repair Contract entered by the appellant with their customers has been recognized as Works Contract by the Government of Karnataka and the registration has been obtained for payment of sales tax. When that is the case, it cannot be said that the spare parts received by the clients of the appellant have not been sold to them. We 9 ST/86163/2015 ST/CO/91198/2015 hold that in any Annual Maintenance Contract the spare parts etc. which have been used in the course of the maintenance service are definitely to be considered as sold and when sales tax has been paid on the value of such goods, simultaneously one cannot charge them to the service tax. In view of these clear legal provisions, there is absolutely no justification for levy of service tax beyond 30% of the value of the total contract. We would like to state that the data provided by the appellant shows that the adoption of 30% of the value of the contract towards value of services rendered appears to be reasonable in the light of the payment of sales tax on the 70% value which has also been accepted. Therefore, this valuation cannot be said to be arbitrary. In these circumstances, we do not find any merit in the impugned orders. Since, the demand of duty is not sustainable the demand of interest, penalty etc. also are not justified. Hence, we allow the appeals with consequential relief." 6.2 This decision of tribunal has been approved by the Apex Court as reported in 2012 (28) S.T.R. J44 (S.C.). 7.0 Commissioner (Appeal) has in para 6.2 of his order has listed out the documents which were produced before him on basis of which he concluded that the value of material sold during the course of providing the said services has been made available. The documents so perused and considered by him are listed below_ a. Copies of Work Order relied upon in the show cause notice;
10 ST/86163/2015 ST/CO/91198/2015 b. Ciopies of the VAT return filed by them during the period covered in the show cause notice. c. Copy of VAT Challans.
d. Copy of Chartered Accountant Certificate certifying the payment of VAT against such composite contracts.
e. Copy of ledger account pertaining to purchase of materials during the said period.
8.0 During the course of hearing we had perused some of these documents and found that indeed in the work order details of material sold along with the cost of labour and material have been shown both on the work order and the invoices raised. From the perusal of the said documents we are of the view that respondents substantially comply with requirements of the Notification No 12/2003-ST and benefit of the said Notification cannot be denied while computing the value for payment of Service Tax on the taxable services provided by them.
9.1 Though Commissioner (Appeal) has in his order observed that "value of materials deemed to be sold during the execution of the contract can be calculated to be 67% of the gross value on which VAT has been paid". The correctness of same needs to be verified from the 11 ST/86163/2015 ST/CO/91198/2015 documents and actual value of material sold during the provisioning of such services needs to be worked and demand of service tax worked out accordingly. Thus he has in his order observed "The amount of service tax already paid by the appellant at the composite rate of 4% during the period of demand (amounting to payment opf service tax at 12% on the abated value of 33%) during the period of demand is ordered to be appropriated against the service tax payable by the appellant during the demand period under as defined under Management, Maintenance or Repair Services."
9.2 From the order of Commissioner (Appeal) it is apparent that demand of Service Tax payable needs to be worked out and the payments already made against the provisions of these services be adjusted the against the demand so worked out. If any amount remains unpaid after such adjustment the same needs to be recovered from the respondents.
9.3 Revenue should have as per the order of Commissioner (Appeal) made the calculation of the Service Tax payable after allowing the benefit of Notification No 12/2003-ST and recovered the amounts if any that were not paid. Instead they have chosen to file this appeal.
12 ST/86163/2015 ST/CO/91198/2015 10.0 In our view, there is no merit in the appeal of revenue and hence it is dismissed. However revenue needs to work out demands in view of our observations in para 8 & 9 of this order. Cross objection is also disposed of.
(Pronounced in court) (Dr. D.M. Misra) (Sanjiv Srivastava) Member (Judicial) Member (Technical) tvu