Tribunal rules electricity cost part of taxable service value, directs pre-deposit.

The Tribunal held that the cost of electricity supplied free by clients should be included in the taxable service value, directing M/s Inox Air Products Ltd. to make a pre-deposit of Rs.1.00 Crores within eight weeks. The Tribunal dismissed the appellant's attempt to reclassify the service and emphasized that any change in classification should be raised before the appropriate authority. The Tribunal differentiated the legal judgments cited by the appellant, concluding that they had not established a prima facie case for a complete waiver of the pre-deposit amount.

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Issues:
1. Service tax liability on the cost of electricity supplied free by clients.
2. Classification of service rendered by the appellant.
3. Applicability of relevant legal judgments on the case.

Issue 1: Service tax liability on the cost of electricity supplied free by clients:
The appellant, M/s Inox Air Products Ltd., received electricity free of cost from their clients for plant operation and maintenance services. The department issued a show-cause notice demanding service tax on the cost of electricity not included in the taxable service value. The appellant argued that since they did not charge for the electricity supplied, they should not be liable for service tax on it. The appellant cited legal judgments to support their stance. However, the Tribunal observed that as per Section 67 of the Finance Act, 1994, when a service provider receives consideration not wholly or partly in money, the amount in money equivalent to the consideration should be included in the taxable service value. Therefore, the cost of electricity supplied free by clients should be considered as part of the taxable service value. The Tribunal directed the appellant to make a pre-deposit of Rs.1.00 Crores within eight weeks, with the balance dues waived upon compliance.

Issue 2: Classification of service rendered by the appellant:
The appellant sought to reclassify the service under "maintenance and repair service" through a miscellaneous application. However, the Tribunal noted that the appellant had consistently discharged service tax liability under the category of "Consulting Engineers" without disputing the classification previously. The Tribunal dismissed the miscellaneous application as non-maintainable, emphasizing that any change in classification should be raised before the appropriate authority for consideration. The issue of classification was not a point for decision before the adjudicating authority, which focused solely on the valuation of services rendered.

Issue 3: Applicability of relevant legal judgments on the case:
The appellant relied on legal judgments, including the case of Mooriroku UT India (P) Ltd., to argue against the inclusion of the cost of electricity in the taxable service value. However, the Tribunal differentiated the nature of the cases cited by the appellant, emphasizing that the issue in the present case pertained to service tax liability, not sales tax. The Tribunal found that the case laws cited by the appellant did not support their position, as the focus of the legal precedents differed from the current scenario. The Tribunal concluded that the appellant had not established a prima facie case for a complete waiver of the pre-deposit amount, directing them to comply with the specified pre-deposit requirement.

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