2022 (2) TMI 409 - AT - Service Tax

Tribunal allows reclassification of service for tax purposes, granting Cenvat Credit

M/s. Sundaram Industries Pvt. Ltd. Versus Commissioner of GST & CE.

The Tribunal ruled in favor of the appellants, allowing them to classify the service as Maintenance or Repair Service instead of Works Contract Service ... Valuation of services - retreading of tyres - service tax charged on the gross amount charged under Section 67 of the Finance Act, 1994 - Department entertained a view that the activity of retreading of tyres falls under Works Contract Service (WCS in short) and the appellants classified the service under Maintenance or Repair Service - violation of Rule 2 A of the Service Tax (Determination of Value) Rules, 2006 - April 2014 to March 2016, April 2016 to June 2017 and May 2015 to August 2016 - CENVAT Credit for Works contract services - HELD THAT:- The issue was analysed by the Tribunal in the appellant’s own case M/S. SUNDARAM INDUSTRIES LIMITED VERSUS COMMISSIONER OF GST & CENTRAL EXCISE (VICE-VERSA) [2020 (12) TMI 282 - CESTAT CHENNAI] for the period prior to 01.07.2012 as well as for the period after 01.07.2012 - The Tribunal followed the decision in the case of M/S SV JIWANI VERSUS CCE & ST, VAPI [2014 (3) TMI 454 - CESTAT AHMEDABAD]. This decision was challenged before the Hon’ble High Court of Bombay by the department in COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX, VAPI VERSUS M/S. S.V. JIWANI, NAROLI, SILVASSA [2016 (3) TMI 484 - BOMBAY HIGH COURT], the Hon’ble High Court dismissed the appeal filed by the department. Similar view was taken by the Tribunal in the case of M/S INTERARCH BUILDING PRODUCTS PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX, NOIDA [2018 (1) TMI 491 - CESTAT ALLAHABAD]. Moreover, the decision of the Hon’ble High Court of Bombay has been accepted by the department as per their Circular No. 1063/2/2018-CX dated 16.02.2018. Applying the decision in the appellant’s own case, the impugned orders cannot sustain. Appeal allowed - decided in favor of appellant. Issues:1. Classification of service under Works Contract Service (WCS) or Maintenance or Repair Service2. Discharge of service tax on the gross amount charged under Section 67 of the Finance Act, 19943. Availment of Cenvat Credit on inputs for Works Contract Service (WCS) in the nature of retreading activityAnalysis:Issue 1: Classification of service under WCS or Maintenance or Repair ServiceThe appellants were engaged in tyre retreading activity and had not discharged the service tax correctly according to the department's view. The department considered retreading of tyres as falling under Works Contract Service (WCS), while the appellants classified it under Maintenance or Repair Service. The dispute centered around the correct classification and determination of taxable value for service tax purposes.Issue 2: Discharge of service tax on the gross amount charged under Section 67The department contended that the appellants should pay service tax under WCS as per Rule 2 A of the Service Tax (Determination of Value) Rules, 2006, which would exclude the value of goods. However, the appellants argued that they had correctly discharged service tax on the gross amount charged under Section 67 of the Finance Act, 1994, including the value of goods, and had availed Cenvat Credit on inputs. The dispute revolved around the correct method of determining the taxable value for service tax calculation.Issue 3: Availment of Cenvat Credit on inputs for WCSThe appellants claimed that they were entitled to avail Cenvat Credit on inputs used for providing WCS in the nature of retreading of tyres, as the goods used fell within the definition of inputs under the Cenvat Credit Rules, 2004. The department argued against the availment of Cenvat Credit on inputs based on Rule 2 A of the Service Tax (Determination of Value) Rules, 2006. The dispute involved the interpretation of rules governing the availment of Cenvat Credit for works contract services.The Tribunal, referencing previous decisions and High Court judgments, ruled in favor of the appellants, allowing them to discharge service tax on the gross amount charged under Section 67 and avail Cenvat Credit on inputs for Works Contract Service (WCS) in the nature of retreading activity. The impugned orders were set aside, and the appeals were allowed with consequential reliefs as per law.