https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=769626 https://www.taxtmi.com/caselaws?id=769626 Non-payment of service tax on the entire charges collected from M/s Hindustan Zinc - Maintenance & Repair Services - Whether the appellant is liable to pay service tax on the differential amount of consideration and actual value of spare parts for the period prior to 01.07.2012 or not? - HELD THAT:- It is a fact on record that maintenance and repair contracts as were entered between appellant and M/s Hindustan Zinc Limited are the composite contracts involving supply of goods as well as for providing the service. Such Contracts were there is a contract of supply of goods as well as of providing services, are termed as 'Works Contracts' and the same were made taxable w.e.f. 01.06.2007 under the category of 'Works Contract Services' as held by the Hon'ble Apex Court in the case of Commissioner v. Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT]. The Hon'ble Supreme Court in Larsen & Toubro in paragraph 24 drew a distinction between the service contracts simpliciter and a composite works contracts which would involve both services and goods and held that it is only w.e.f. June 01, 2007 that composite contracts can be subjected to levy of service tax and not before this date. Therefore, prior to 01.06.2007 also the nature of activity undertaken by the appellant is works contract services but for the period prior to 01.06.2007 covered by the decision of Larsen & Toubro Ltd. this was not liable to pay Service Tax at all. W.e.f. 01.06.2007. Similar issue has come up before this Tribunal in the case of Xerox India Ltd. [2018 (3) TMI 1006 - CESTAT CHANDIGARH] wherein this Tribunal has held that if service has been provided along with material and the value of material supplied cannot be vivisected, in that circumstances, appropriate classification of the service shall be works contract service and same is not taxable prior to 01.06.2007. Hence, prior to 1.6.2007, even the service portion of a composite contract was outside the ambit of service tax net. Accordingly, the repair and maintenance services under clause (zzg) of Section 65(105) refers only to contracts for service simpliciter and not composite contracts like the present ones. Therefore, no service tax is leviable on such composite contracts upto 1.6.2007. Coming to the impugned demand for the period post 01.07.2012, it is observed from the show cause notice dated 03.09.2013 as issued for the post July 2007 amendment but the amended provisions have not been mentioned in the said show cause notice. It is utmost mandatory for the Department to first establish that the nature of the services subsequently and the respective charging provisions and the heavy burden is cast upon the department to prove that the demand is sustainable under the said charging provisions but as already observed above. The show cause notice has no proper and correct charging provisions. The show cause notice is nothing but a vague show cause notice. The demand on such show cause notice is not sustainable. Conclusion - i) The appellant's composite maintenance and repair contracts involving supply of spare parts were works contracts and not taxable as service contracts simpliciter prior to 01.07.2012. ii) Service tax demand on the spare parts portion for periods prior to 01.07.2012 is unsustainable. iii) The show cause notices issued for the post-01.07.2012 period were vague and failed to specify the correct charging provisions, invalidating the demand for that period. iv) The value of spare parts on which VAT was paid cannot be included in the taxable value for service tax under composite contracts. The orders under challenge are hereby set-aside - Appeal allowed. Case-Laws Service Tax Fri, 25 Apr 2025 00:00:00 +0530