2017 (5) TMI 400 - AT - Service Tax

CESTAT New Delhi: Repair /= Maintenance for Service Tax. Clarification on Tax Liability.

The Appellate Tribunal CESTAT New Delhi ruled in favor of the appellant, setting aside the order upholding a demand for service tax under maintenance and ... Maintenance or repair service - hauling/maintenance of plant and equipments of the client - case of appellant is that in the absence of any maintenance contract or agreement, the one time repair activities carried out by them cannot be taxed as “maintenance or repair service” - Held that: - The period involved in the present dispute is from 01/07/2003 to 31/03/2005. During the said period the service tax liability under “maintenance or repair service” will arise when the same service is provided by any person under maintenance contract or agreement - there is no maintenance contract or agreement in the said arrangement. There is a fine distinction between one time repair activity, (though it may involve work as a part of overall maintenance) and a regular maintenance contract. The maintenance agreement or contract, may or may not include in its scope repair of specific equipment - The Tribunal in the case of Basant Enterprises vs. CCE, Bhopal [2011 (4) TMI 550 - CESTAT, NEW DELHI], held that the liability under maintenance or repair service cannot be apply to repair activity in terms of rate contract work order - appeal allowed - decided in favor of appellant. Issues:1. Interpretation of service tax liability under maintenance or repair service.2. Determination of maintenance contract or agreement for service tax applicability.Analysis:The judgment by the Appellate Tribunal CESTAT New Delhi dealt with the interpretation of service tax liability under maintenance or repair service. The appellant challenged the order of the Commissioner (Appeals) upholding a demand of service tax under the category of maintenance and repairing service. The appellant argued that without a maintenance contract or agreement, the one-time repair activities should not be taxed as maintenance or repair service. The Tribunal examined the scope of work awarded to the appellant by the client, which mainly involved replacement/change of parts, overhauling, and servicing of manufacturing equipment and boilers. It was noted that there was no maintenance contract or agreement evident in the arrangement. The Tribunal distinguished between one-time repair activities and regular maintenance contracts, emphasizing that maintenance agreements may or may not include repair of specific equipment. Reference was made to similar cases where service tax liability was dropped by the First Appellate Authority for other contractors of the same client.Furthermore, the Tribunal relied on previous decisions in Basant Enterprises vs. CCE, Bhopal and Aditya Vidyut Appliances Ltd. vs. CCE, Mumbai, where it was held that liability under maintenance or repair service does not apply to repair activity in terms of rate contract work order. Based on the discussion and analysis of the tax entry scope, the Tribunal concluded that the impugned order was not sustainable and set it aside, allowing the appeal of the appellant. The judgment highlighted the importance of a clear distinction between one-time repair activities and maintenance contracts for determining service tax liability under maintenance or repair services.