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of <h1>CESTAT Chennai: Service Tax on Maintenance Contracts Upheld</h1> <h3>M/s. MIL Industries Ltd. Versus CST, Chennai</h3> The Appellate Tribunal CESTAT CHENNAI allowed the appeals arising from a common order regarding tax liability on 'Maintenance and Repairs Service' ... Valuation - Maintenance and Repairs Service - Assessee paid tax on labour charges - dispute relates to the demand of tax on material portion - Held that:- After 46th Amendment to the Constitution, composite contracts can be bifurcated to compute value of the goods sold/supplied in contracts for construction of buildings with labour and material. The service portion of the composite contracts can be made subject matter of service tax. Aspect doctrine is applied for bifurcating/vivisect the composite contract - Service tax can be levied on the service component of any contract involving service with sale of goods etc. Computation of service component is a matter of detail and not a matter relating to validity of imposition of serve tax. It is procedural and a matter of calculation. Merely because no rules are framed for computation, it does not follow that no tax is leviable - Service component of any contract involving service with sale of goods could be levied service tax - Following decision of G.D. Builders Vs. UOI [2013 (11) TMI 1004 - DELHI HIGH COURT] - Matter remanded back - Decided in favour of assessee. Issues: Tax liability on material portion in Maintenance and Repairs Service contracts.In the judgment by the Appellate Tribunal CESTAT CHENNAI, two appeals arising from a common order were taken up together for disposal. The appeals concerned tax liability under the category of 'Maintenance and Repairs Service' for the period from October 2004 to March 2010. The appellants, engaged in manufacturing rubber lined goods, were also involved in rubber lining steel tanks/vessels, steel pipes/fittings/flanges, and similar services at customer premises, for which they paid service tax on labor charges. The dispute centered around the demand for tax on the material portion of these services.The appellant's advocate cited a decision by the Hon'ble Delhi High Court in the case of G.D. Builders Vs. UOI, which held that no tax is leviable on the material portion. Conversely, the Revenue's Authorized Representative referred to an adjudication order and a Tribunal decision in the case of Aggarwal Colour Advance Photo System, where it was held in favor of the Revenue regarding the taxability of the service component of contracts involving service with the sale of goods.Upon considering both arguments and perusing the records, the Tribunal noted the Delhi High Court's decision in the G.D. Builders case. The High Court had held that service tax can be levied on the service component of contracts involving service with the sale of goods, emphasizing that the computation of the service component is procedural and not a question of the validity of imposing service tax. The Tribunal, therefore, set aside the impugned order and remanded both matters back to the adjudicating authority for a fresh decision in light of the Delhi High Court's and Tribunal's decisions. The appeals were allowed by way of remand, with a directive for the adjudicating authority to provide a proper opportunity for hearing before passing any new order, clarifying that the decision was made without expressing any view on merit. The stay applications were also disposed of in the judgment.
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