2015 (7) TMI 508 - AT - Service Tax

Tribunal upholds tax demand, drops penalty in Revenue's appeal

Commissioners of Central Excise, Customs and Service Tax-Surat-I Versus M/s Ketan Engineering Services

The Tribunal upheld the demand of tax along with interest as proposed in the Show Cause Notice, based on the interpretation of relevant provisions and ... Service of maintenance and repairs of plant and equipments - Imposition of penalty - Held that:- Section 65(64) and (105) (zzg) of the Act provides where a manufacturer or any person authorized by him provides a service in relation to the Maintenance, Repair or Servicing of any goods, or equipments excluding a motor vehicle, such service provided is exigible to Service Tax. - recent decision of the Tribunal in the case of Anand Transformers Pvt Ltd (2013 (4) TMI 458 - CESTAT NEW DELHI) would be applicable in the present case. Hence, the impugned order cannot be sustained. - demand of tax alongwith interest as proposed in the show cause notice are upheld and the imposition of penalty is dropped - Decided partly in favour of Revenue. Issues:1. Appeal against dropping of proceedings initiated under Show Cause Notice.2. Service tax liability on maintenance and repair services provided to industrial clients.3. Interpretation of Section 65(64) of the Finance Act 1994.4. Applicability of previous tribunal decisions in determining service tax liability.5. Validity of invoking the extended period of limitation under Section 73(1) of the Act.Analysis:1. The appeal was filed by the Revenue against the dropping of proceedings initiated under a Show Cause Notice by the Commissioner. The Respondent was engaged in providing maintenance and repair services to industrial clients, which were deemed chargeable to Service Tax under Section 65(64) of the Finance Act 1994. The Commissioner had dropped the proceedings based on a decision of the Tribunal and a Board circular. The Revenue contested this decision through the appeal.2. The Adjudicating Authority had dropped the proceedings based on a decision of the Tribunal in a similar case and a Board circular. The Authority observed that in the absence of a maintenance or repair contract, a demand based on rate or value contract work orders was not sustainable. However, the Revenue argued that a previous tribunal decision distinguished the case and allowed the appeal, emphasizing that the Respondent fell within the definition of maintenance or repair services under Section 65(64) of the Act.3. The interpretation of Section 65(64) of the Finance Act 1994 was crucial in determining the service tax liability of the Respondent. The Tribunal considered previous decisions and the specific language of the Act to establish that services provided by the Respondent fell within the scope of maintenance and repair services, making them exigible to Service Tax. The Tribunal also analyzed the applicability of a Board circular in this context.4. The Respondent's Advocate argued against the applicability of a previous tribunal decision, stating that it was not relevant to the present case as the Respondent was a manufacturer. However, the Tribunal disagreed, citing the provisions of Section 65(64) and (105)(zzg) of the Act, which clearly outlined the tax liability for services related to maintenance, repair, or servicing of goods or equipment. The Tribunal relied on recent decisions to support its findings.5. The validity of invoking the extended period of limitation under Section 73(1) of the Act was also discussed. The Tribunal justified the invocation of the extended period based on the facts and circumstances of the case, emphasizing the importance of a correct interpretation of taxing legislation to avoid misinterpretation of tax liability. The Tribunal considered the implications of the Board circular and previous tribunal decisions in this regard.In conclusion, the Tribunal upheld the demand of tax along with interest as proposed in the Show Cause Notice, based on the interpretation of relevant provisions and previous tribunal decisions. The imposition of penalty was dropped, and the appeal filed by the Revenue was allowed.