Composite contract classification under service tax required section 65A analysis before taxing operation and maintenance services.

Classification of services under an operation and maintenance agreement depended on whether the arrangement was properly taxed as maintenance or repair service, or as management, maintenance or repair service after the statutory definition was amended to include management of property. The record showed that the assessees had raised the composite-contract classification rule under section 65A and had urged an alternative classification, but the adjudication orders did not address that methodology or the competing pleas. Because the true character of the composite arrangement required examination of the full factual and legal matrix, the impugned orders were set aside and the matter was remanded for de novo adjudication; the limitation issue was left undecided.

---

---

Issues: Whether the services rendered under the operation and maintenance agreement were correctly classified as maintenance or repair service or management, maintenance or repair service, and whether the adjudication could stand without considering the classification methodology applicable to composite contracts.

Analysis: The agreement was treated by the adjudicating authority as one for management of the power plant and the demand was confirmed on that basis, but the appellate record showed that the appellants had specifically raised the applicability of the statutory classification rule for composite services and had also urged an alternative classification. The definition of maintenance or repair service underwent amendment during the relevant period, and the later definition covered management, maintenance or repair of property. Since the adjudication orders did not address the classification methodology under section 65A or the appellants' alternative pleas, and since the dispute turned on the true character of the composite arrangement, the matter required fresh consideration on the full factual and legal matrix.

Conclusion: The impugned orders were set aside and the matter was remanded for de novo adjudication; the limitation issue was left undecided.

---