2009 (1) TMI 424 - AT - Service Tax

Tribunal Remands Case for Reevaluation of Manufacturers' Service Tax Liability

The Tribunal remanded the case to the Original authority for reevaluation of the liability of the manufacturers of transformers to pay service tax for ... Management, Maintenance and repair services- Circular B1/6/2005-TRU, dated 27.07.2005- . The appellants are manufacturers of power and distribution transformers which they supply to various Government and private organizations. They also repair failed transformers. The revenue felt that the activity of repairing transformers attracted service tax. Held that- the original authority not examine the issue in the light of the Board’s Circular, thus the matter is remanded back to the original authority. Issues:1. Whether the activity of repairing transformers attracts service tax.2. Interpretation of Circular issued by CBEC regarding liability to pay service tax.3. Understanding of the definition given in section 65(64) of the Finance Act, 1994.4. Requirement of a maintenance contract for liability to pay service tax.Issue 1:The appeal was filed against the Order-in-Appeal passed by the Commissioner of Customs & Central Excise, Hyderabad, regarding the liability of manufacturers of power and distribution transformers to pay service tax for repairing transformers. The appellants argued that they should not fall under the service tax net as they only repair, not maintain, transformers. The Commissioner (Appeals) referred to an agreement with a Superintending Engineer and concluded that the appellants would indeed fall under the service tax net. The Tribunal remanded the matter to the Original authority to reexamine the issue in light of a Circular and make a decision accordingly.Issue 2:The appellants relied on a Circular issued by the CBEC, stating that they would be liable to pay service tax only from a specific date. They argued that the Original authority did not properly consider this Circular. The Tribunal directed the Original authority to reevaluate the issue in light of the Circular and make a decision within three months from the date of the Tribunal's order.Issue 3:The appellants contended that the Commissioner (Appeals) misunderstood the definition provided in section 65(64) of the Finance Act, 1994, leading to an erroneous conclusion regarding their liability to pay service tax. The Tribunal did not provide a specific ruling on this issue but remanded the matter to the Original authority for further examination.Issue 4:The appellants argued that in the absence of maintenance contracts with certain companies, they should not be liable to pay any service tax. The Tribunal did not directly address this argument but remanded the case to the Original authority for a comprehensive review, including the consideration of any maintenance contracts in place.In conclusion, the Tribunal remanded the case to the Original authority to reevaluate the liability of the appellants to pay service tax in light of the Circular issued by the CBEC and other relevant factors. The decision highlighted the need for a thorough examination of the agreements and instructions involved before reaching a final determination on the applicability of service tax in this case.