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2. The issue, in brief, is that the appellants are engaged in providing certain taxable services to Naval Ships and other naval projects such as dockyards etc. The Department based on verification noticed that the appellants were, inter alia, attending to the maintenance or repair works to Naval ships and equipments and have also attended to work related to supply, fabrication, erection, testing and commissioning of Berthing Pontoons, Dock Blocks, Wedge Blocks, Gangways etc., at Naval Dockyard, Visakhapatnam in terms of work order dated 03.05.2007. They were also engaged in the work relating to "Load testing of Transborder System of 600- T slipway of dry docks and slipway department at Naval Dockyard". The Adjudicating Authority based on the copies of the work order came to conclusion that all the repair works such as repair of conduiting and clamping, welding of high pressure air and hydraulic pipes, SS pipes etc., carried out onboard Naval ships, repair of Blanking off plate SDD Industrial pumps and maintenance works relating to maintenance of "Transborder system and allied equipment" located at Naval Dockyard under Annual Maintenance Contract entered with entire dockyard were covered under the purview of MMRS. Similarly, based on the appreciation of facts in respect of certain work orders, Adjudicating Authority felt that they have provided certain services to the entire dockyard, which also involved supply of equipment or goods and therefore held that such works were composite work relating to supply, fabrication, erection, testing and commissioning of equipment/goods holding that the said service would fall under WCS and also offering them an option for Composition Scheme. The Adjudicating Authority also in respect of work order no. YSMC/3548 dated 03.05.2007 held that they were carrying out load testing of transborder system and therefore it was covered under TTA. The plea against invocation of extended period was also denied on the grounds that the appellant had not taken the service tax registration and nor paid any service tax and only on gathering intelligence about such non-payment it came to the notice of the Department. Similarly, the penalty was also considered appropriate under Section 78 in the facts of the case.

3. Learned Advocate for the appellant has mainly contested the demand on the grounds that the entire provision of services were to the Naval Authorities and were performed inside Naval Docks, therefore, the supply to the Government, which is not engaged in any commercial activity. For the sake of convenience, his grounds against the confirmation of demand under different heads are summarised as under:

a) Management & Maintenance Repair Services (MMRS): His main submission is that after the introduction of Port service encompassing all different services provided within Port area and in order to mitigate certain unintended levy of service tax, Government had issued Notification No. 31/2010-ST dated 22.06.2010, wherein, there is a specific mention of repair of ships, boards, vessels belonging to navy, coast-guard and custom being exempted from service tax liability when undertaken in a port. Therefore, it is clear that there was no intention of Government to levy any tax on repair of ships belonging to Government of India or Navy and on this ground itself, apart from the specific exemptions, the extended period could not have been invoked. In so far as fabrication and periodic maintenance of Transborder system is concerned, his submission is that it is an integral part of vessel to be moved for dry docking and therefore without its support the repair and maintenance cannot be carried out and hence cannot be subjected to service tax.

Similarly, in respect of supply of four climate control devices for LP Air Compressors Monitoring room in the Naval Dockyard pursuant to issuance of and purchase order, it was obvious that the transaction primarily involved supply of materials and therefore a purchase order was issued and not a work order therefore it is in the nature of sale of goods.

c) Technical Testing and Analysis Services (TTAS): In so far as, work of Load testing of transborder system at 600-T slipway of dry docks and slipway department the Naval Dockyard, his main submissions is that the appellants are not Technical Testing or Analysis Agency. He further submits that though they were rectifying some defects, however, he categorically stated that they had not issued any "certificate" certifying the condition of the Drugs Buyer System, hence not classifiable under the said heading. Moreover, this inspection was a joint inspection of Naval Authorities and other technical experts.

8. We note that appellants have taken the argument that they were primarily engaged in repair and maintenance pertaining to repair of Indian Naval Ships, as would be evident from various work orders. Therefore, having regards to the nature of the work these activities cannot be, on its own, construed as maintenance or repair service. In so far as, demand under the category of EIC service they had essentially undertaken the work in the premises of Naval Dockyard which involves certain fabrication and supply of pre-fabricated steel Pontoons which were placed by the Jetty/Berth and hence it cannot be construed as EIC activity. In so far as deduction under WCS they were primarily engaged in the work in the premises of Naval Dockyard. This activity was provision of two berthing pontoons for SPV at Naval Dockyard and the show cause notice has not clarified under which category or sub-clause under Section 65(105)(zzzzza) the demand was made. It was an act of mere placing a pontoon by the side of dock to prevent the damage to the ship and therefore such activity cannot be brought under the category of WCS. So far as TTA service, it was primarily undertaken in the premises of Naval Dockyard and they were not doing any separate service or inspection and it was the expert from the Naval Dockyard who was doing the same and their work was limited to provide certain weight at various points on the Transborder System. Thus, such activity cannot be brought under TTA.