Service tax on maintenance contracts applies only to labour value; printing bills is not Business Auxiliary Service.

Maintenance and repair contracts involving supply of goods and spare parts were taxable only on the labour or service component, because the value of goods sold in the course of the contract could not be subjected again to service tax under section 67 and the sale element was recognised as a transfer of property in goods. The Tribunal followed its earlier view in the assessee's own matter and held that tax could not be levied on the full contract value. Printing of bills was treated as distinct from billing itself and was held not to fall within Business Auxiliary Service. The assessee therefore obtained relief on both issues.

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Issues: (i) Whether the maintenance and repair contracts were liable to service tax on the entire contract value or only on the labour/service portion after excluding the value of goods and spare parts sold; (ii) Whether the printing of bills amounted to Business Auxiliary Service.

Issue (i): Whether the maintenance and repair contracts were liable to service tax on the entire contract value or only on the labour/service portion after excluding the value of goods and spare parts sold.

Analysis: The contracts were treated as works contracts involving supply of parts and accessories during repair and maintenance. The value of goods sold in the course of providing the service could not again be subjected to service tax. Reliance was placed on the settled position that section 67 of the Finance Act permits exclusion of the value of goods sold, and on the constitutional recognition that transfer of property in goods involved in such contracts is taxable as a sale under Article 366(29A)(b). The Tribunal followed its earlier decision in the assessee's own case and held that service tax could be levied only on the labour portion.

Conclusion: The assessee was liable to service tax only on the labour portion and not on the full value of the maintenance and repair contracts.

Issue (ii): Whether the printing of bills amounted to Business Auxiliary Service.

Analysis: The activity was one of printing bills, which was treated as distinct from billing itself. On that footing, the activity did not fit within the category of Business Auxiliary Service, and the Revenue's objection was rejected in the assessee's own case earlier. The same reasoning was applied again.

Conclusion: The printing of bills did not amount to Business Auxiliary Service.

Final Conclusion: The demand relating to maintenance and repair service was not sustainable beyond the taxable labour component, and the Revenue's objection on Business Auxiliary Service failed, resulting in relief to the assessee and rejection of the Revenue's appeal.

Ratio Decidendi: Where a maintenance contract involves sale of goods or spare parts in the course of service, service tax can be levied only on the service component and not on the value already subjected to sales tax or VAT, and a distinct printing activity does not automatically fall within Business Auxiliary Service.

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