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Issues: (i) Whether maintenance and repair of gas turbines erected and fixed to the earth amounted to service in respect of immovable property and was, therefore, outside the service tax net for the relevant period; (ii) whether the assessee was entitled to exclude the value of spare parts under Notification No. 12/2003-ST.
Issue (i): Whether maintenance and repair of gas turbines erected and fixed to the earth amounted to service in respect of immovable property and was, therefore, outside the service tax net for the relevant period.
Analysis: The turbines were found to be installed on site and fixed to the earth, and the Revenue produced no material to show that they were movable goods. The description used in the contract as equipment did not alter the physical character of the turbines. The reasoning also drew support from decisions treating similar turbine installations as immovable property.
Conclusion: The service was held to be rendered in respect of immovable property and was not taxable for the relevant period.
Issue (ii): Whether the assessee was entitled to exclude the value of spare parts under Notification No. 12/2003-ST.
Analysis: Invoices for spare parts were issued and the parts were imported and cleared in the course of the transaction. The existence of invoice-based transaction value and the contractual structure showed that the spare parts were sold as part of the composite arrangement. In the absence of contrary evidence, the departmental objection that there was no sale was rejected.
Conclusion: The assessee was entitled to the exemption for the value of goods and materials sold, and the spare-part value could not be added to the taxable service value.
Final Conclusion: The Revenue's challenge failed because the underlying service was outside tax for the period in question and, independently, the spare parts qualified for exclusion under the exemption notification.
Ratio Decidendi: The physical character of the installed asset governs whether maintenance is of immovable property, and where goods are demonstrably sold as part of the service transaction, their value is excludible under the exemption notification.
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