Tribunal decision: Consumables included in gross value, Major Maintenance Reserve not taxable. Operation charges not taxable. .

The tribunal upheld the inclusion of consumables and spares in the gross value for maintenance services, dismissing the appeal. Major Maintenance Reserve (MMR) was found not taxable. Operation charges were not considered taxable as they did not fall under "Management, Maintenance or Repair Service." Penalties were set aside, and demands on operation charges were set aside, with appeals allowed for various cases.

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Issues Involved:
1. Service tax on maintenance and repair services.
2. Service tax on Major Maintenance Reserve (MMR).
3. Service tax on operation charges.

Issue-wise Detailed Analysis:

1. Service Tax on Maintenance and Repair Services:
The appellants argued that the agreement for operation and maintenance of the power plant implies that maintenance services are consumed by self and not liable to service tax. They paid service tax on 45% of the operating fee but deducted the cost of consumables and spares, claiming VAT paid under Works Contract Service. The department contended that the cost of materials should be included in the taxable value, and the appellants wrongly availed CENVAT credit on consumables and spares. The tribunal upheld the inclusion of consumables and spares in the gross value for maintenance services, dismissing the appeal on this aspect.

2. Service Tax on Major Maintenance Reserve (MMR):
The appellants maintained that MMR is a deposit for major breakdowns and not subject to service tax. The department viewed MMR as taxable. The tribunal found that MMR is a reserve created under a trust for major maintenance, not part of maintenance fees, and thus not taxable. The appeal on this aspect was allowed.

3. Service Tax on Operation Charges:
The department argued that 55% of the operator fee apportioned towards operation charges falls under "Management, Maintenance or Repair Service" as amended in 2005. The appellants contended that the primary activity is electricity generation, which is an excisable product, and operation does not equate to management of immovable property. The tribunal agreed with the appellants, stating that the operation of the power plant is not management of immovable property and cannot be taxed under the said service. The demand on operation charges was set aside, and the appeals were allowed.

Judgment Summary:
- ST/175/2007 and ST/283/2012: Inclusion of consumables and spares in maintenance service upheld; MMR not taxable; penalties set aside; extended period notice upheld; appeals partly allowed.
- ST/282/2012, ST/136/2012, ST/5/2010, ST/265/2012, ST/266/2012, ST/96/2011, ST/103/2008: Demands on operation charges set aside; appeals allowed with consequential reliefs.

Pronounced in open court on 23-05-2017.

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