2017 (4) TMI 586 - AT - Service Tax

Manufacturer's Post-Sales Services Classified as Maintenance, Not Taxable

C.C.E., Bangalore-II Versus Indital Construction Machinery Ltd.

The Appellate Tribunal CESTAT Bangalore ruled that post-sales services provided by a manufacturer of material handling equipment, including periodic ... Classification of service - post-sales services such as arrangements for checking the equipments periodically, providing the services of personnel, who are highly skilled and trained’ - classified as ‘consulting engineering service’ or as maintenance service? - Held that: - Deploying highly skilled and trained personnel for taking care of periodical servicing or even putting those people throughout the year on such job in respect of servicing and maintenance of complex hydraulic and mechanical equipments will not make these services ‘Consulting Engineer’s service’, when they are actually in the category of ‘maintenance services’ - appeal rejected - decided against Revenue. Issues:Classification of post-sales services provided by the manufacturer for material handling equipment as consulting engineering service or maintenance service.Analysis:The appeal before the Appellate Tribunal CESTAT Bangalore involved a dispute regarding the classification of services provided by the manufacturer of material handling equipment. The Revenue contended that the services should be classified as consulting engineering services, while the assessee argued that they fall under maintenance services. The key activities in question included post-sales services like periodic equipment checks and deployment of skilled personnel for repairs.The Revenue, represented by Shri Parashiva Murthy, argued that the manufacturer's services, such as instant repairs and troubleshooting of sophisticated hydraulic and mechanical systems, qualified as consulting engineering services. It was emphasized that the services were essential for post-operation management and technical support. The Revenue sought to overturn the Commissioner's decision that favored the assessee.Upon careful consideration of the facts and submissions, the Tribunal concluded that the services provided were in the category of maintenance services. It was noted that during the relevant period of dispute (1997-98 to 1999-2000), these maintenance services were not taxable until they were included in the service tax net in the Budget of 2003. The Tribunal highlighted that deploying skilled personnel for periodic servicing of complex equipment did not transform the services into consulting engineering services, as they fundamentally remained maintenance services.In light of the above analysis, the Tribunal found the Revenue's appeal to be without merit and upheld the impugned order in favor of the assessee. The judgment clarified that the services in question were correctly classified as maintenance services and were not subject to taxation during the period under consideration. The decision was pronounced in open court on 7-10-2016, affirming the classification of the manufacturer's post-sales services as maintenance services rather than consulting engineering services.