2012 (7) TMI 780 - AT - Service Tax

Tribunal upholds exemption for maintenance services with spare parts under Notification No.12/2003-ST

The Tribunal rejected the Revenue's appeal, upholding the respondent's eligibility for exemption under Notification No.12/2003-ST for service tax on ... Eligibility for Notification No.12/2003-ST - According to Notification No.12/2003 what is required is that the goods and materials must have been sold by the service provider to the recipients of services and evidence should be available – Held that:- Invoices have been raised for the value of spare parts - Having accepted the invoice submitted at the time of import and having determined the transaction value at that time, if the department makes a claim that spare parts have not been sold, it will not be acceptable unless it is shown that the transaction value was rejected and arrived at on some other basis or before the Customs it was declared that there were no sale. No such evidence has been placed before us nor does it form a part of memo of appeal - value of spare parts form a part of contract for maintenance and repair and exemption under the Notification No.12/2003-ST is available – In favor of assessee Repair or Maintenance service in respect of movable or immovable goods - held that:- While the respondents have produced photographs of gas turbines to submit that they are nothing but immovable property, other than relying on the contract and submission that the Commissioner has misconstrued the contract to be for maintenance and repair of power plant, the Revenue has not come up with any evidence or document to support the view that turbines is a movable property. - Decided in favor of assessee. Issues:1. Eligibility for exemption under Notification No.12/2003-ST for service tax on maintenance fees deducted for spare parts.2. Determination of whether maintenance and repair services were provided in respect of immovable property.3. Dispute regarding the sale and inclusion of the value of spare parts in the contract for maintenance and repair services.Issue 1:The case involved a dispute over the eligibility of the respondent for exemption under Notification No.12/2003-ST for service tax on maintenance fees after deducting the value of spare parts supplied. The respondent had obtained Service Tax Registration and paid service tax as per the terms of the contract. The Revenue contended that the exemption did not apply to the spare parts deducted from maintenance charges. The Commissioner (Appeals) set aside the original order, leading to the Revenue's appeal.Issue 2:The main contention was whether the maintenance and repair services provided were in respect of immovable property. The Revenue argued that the gas turbines maintained were immovable property, while the respondent claimed they were movable property based on the contract terms. The Tribunal analyzed previous legal decisions and found that the turbines, though part of a power plant, were fixed to the earth and considered immovable property. The Tribunal also highlighted the lack of evidence from the Revenue to support their stance.Issue 3:The dispute regarding the sale and inclusion of the value of spare parts in the contract for maintenance and repair services was a crucial aspect of the case. The respondent argued that spare parts were sold, evidenced by invoices raised and customs procedures. The Tribunal emphasized that the existence of transaction value at the time of import and the issuance of invoices indicated a sale of spare parts, making them part of the maintenance contract. This inclusion qualified the respondent for the exemption under Notification No.12/2003-ST.In conclusion, the Tribunal rejected the Revenue's appeal, finding no merit in their arguments. The judgment upheld the eligibility of the respondent for exemption under Notification No.12/2003-ST, affirmed that the maintenance services were provided in respect of immovable property, and validated the inclusion of spare parts in the contract for maintenance and repair services.