2018 (3) TMI 1006 - AT - Service Tax

Tribunal rules in favor of M/s. Xerox, no service tax liability

The tribunal ruled in favor of M/s. Xerox, setting aside the demands for service tax, interest, and penalties. The activities under Maintenance and Repair ... Classification of services - Maintenance and Repair services - Business Support Service - Business Auxiliary Service - Whether the activity undertaken by M/s. Xerox for various contracts for Maintenance and Repairs do qualify as Maintenance or Repair Service, or not? - Held that: - It is a fact that appellant is engaged in the activity of Maintenance and Repair of equipments supplied by them under various contracts. M/s. Xerox is required to replace the parts and accessories at the time of repair or maintenance - these are the Works Contracts and M/s. Xerox is paying VAT on the portion of materials supplied - M/s. Xerox is liable to pay service tax only on Labour Portion. Whether the service namely, XGS shall qualify under 'Business Support Service' or Business Auxiliary Service or under Works Contract service? - Held that: - the appellant is engaged in the activity of printing of bill and not Billing . Therefore, the said printing of bill is altogether a different activity from the billing and cannot be termed as Billing - the services in question do not qualify under the category Business Auxiliary Service. Whether the activities undertaken by M/s. Xerox under various contracts of Maintenance and Repair Service and Business Support Service are properly classifiable under Works Contract or not? - Held that: - The said issue has been examined by the Hon’ble Apex Court in the case of Larsen & Toubro Limited [2015 (8) TMI 749 - SUPREME COURT] wherein it has been held that prior to 01 June 2007, if the services have been provided along with material and the value of material supplied cannot be vivisected, in that circumstance, the appropriate classification of the service shall be Works Contract service and the same was not taxable prior to 01.06.2007. Therefore, for the period prior to 01.06.2007, no demand is sustainable under the category of Maintenance and Repair Service/ Business Support Service/ Business Auxiliary Service for the activity undertaken by M/s. Xerox as the services of Business Support Service and Maintenance and Repair along with material and the agreement cannot vivisect the amount of material supplied by M/s. Xerox. For the period post 01.06.2007, the Maintenance and Repair and XGS services are under Works Contract, whether the services under Works Contract is taxable or not? - Held that: - for the first time Section 65 (105) (zzzza) set-out to tax the service as Works Contract service for levy of service tax on the works executed along with the material - there is no merit in the impugned order demanding service tax from M/s. Xerox under the category of Maintenance and Repair Services/ Business Support Service. As no demand is sustainable on M/s. Xerox therefore demand of interest and penalties are also set-aside. Appeal dismissed - decided against Revenue. Issues Involved:1. Classification of Maintenance and Repair Services.2. Classification of Xerox Global Services (XGS) under Business Support Service or Business Auxiliary Service.3. Classification of activities under Works Contract.4. Imposition of interest and penalties on M/s. Xerox.Detailed Analysis:1. Classification of Maintenance and Repair Services:The tribunal examined whether the activities undertaken by M/s. Xerox for Maintenance and Repair qualify as Maintenance or Repair Service. It was noted that M/s. Xerox is engaged in maintaining and repairing equipment under various contracts such as FSMA, SSMA, and AMC. The Hon’ble Apex Court had previously held these contracts as Works Contracts, making M/s. Xerox liable to pay VAT/Sales Tax on the material portion. Consequently, M/s. Xerox was found liable to pay service tax only on the labor portion of these contracts as per the decision in Wipro GE Medical Systems Limited, which was affirmed by the Hon’ble Apex Court. The tribunal concluded that M/s. Xerox correctly paid service tax on the labor portion and not on the material portion.2. Classification of Xerox Global Services (XGS) under Business Support Service or Business Auxiliary Service:The tribunal analyzed whether XGS services should be classified under Business Support Service or Business Auxiliary Service. The definition of Business Auxiliary Service was examined, focusing on whether the activities such as billing, collection, and recovery of cheques fall under this category. The tribunal referred to the Hon’ble Andhra Pradesh High Court's decision in Phoenix IT Solutions Limited, which clarified that billing and accounting work executed by the assessee is taxable under Support Service of Business or Commerce and not as Business Auxiliary Service. The tribunal held that M/s. Xerox’s activities of printing bills do not qualify as billing under Business Auxiliary Service. Therefore, the tribunal dismissed the Revenue’s appeal on this issue.3. Classification of Activities under Works Contract:The tribunal considered whether the activities undertaken by M/s. Xerox under various contracts qualify as Works Contract. Referring to the Hon’ble Apex Court’s decision in Larsen & Toubro Limited, it was noted that services provided along with materials, where the value of materials cannot be vivisected, should be classified under Works Contract Service. The tribunal held that prior to 01.06.2007, no demand is sustainable under the category of Maintenance and Repair Service/Business Support Service/Business Auxiliary Service as the services were provided along with materials. For the period post 01.06.2007, the services were not covered under Works Contract as per Section 65 (105) (zzzza) of the Finance Act, 1994, making M/s. Xerox not liable to pay service tax under these categories.4. Imposition of Interest and Penalties:As the tribunal found that M/s. Xerox was not liable to pay service tax under the examined categories, it also set aside the demand for interest and penalties. The tribunal concluded that the impugned order demanding service tax from M/s. Xerox is without merit and thus, the appeal filed by M/s. Xerox was allowed, and the appeal filed by the Revenue was dismissed.Conclusion:The tribunal ruled in favor of M/s. Xerox, setting aside the demands for service tax, interest, and penalties. The activities under Maintenance and Repair Services and XGS were not liable to service tax under the examined categories, and the classification under Works Contract was affirmed for the relevant periods.