TaxTMI 
TaxTMI 
2024 (8) TMI 1213
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....e machines supplied by the Germany company and are providing maintenance and services during the warranty period. For this purpose, a warranty provision is made in the books of account of the appellant as "warranty income" from the commission received by them from M/s.Heidelberg Germany. 2. According to department, the 'warranty income' for which provision is made in their books of account is a consideration for providing maintenance and repair services as defined under Section 65 (64) of the Finance Act, 1994 as introduced w.e.f. 1.7.2003, amended w.e.f. 16.6.2005 and later amended on 1.5.2006. 3. A combined reading of Section 65 of the Finance Act, 1994 and the Board's Circular No.59/8/2003 dated 20.06.2003 reveals that the service provided by the appellant falls under the category of "Maintenance and Repair Services" and the appellant ought to have paid service tax on the warranty income for which provision is made in their books of account. The appellant did not discharge service tax on this income. Accordingly, show cause notice dt. 12.6.2007 was issued to the appellant proposing to demand service tax for the period 1.7.2003 to 31.12.2006 invoking the extended period. After ....
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.... machineries sold by the Germany company in India, the appellant created a provision in their books of account in anticipation of the expenses which the appellant may have to incur for providing warranty services. The said provision was created as per Accounting Standards (AS) 29. This provision was made by appropriating some amount from the commission received by the appellant from their parent company. 7.2 The said 'warranty income' has been debited to Profit & Loss Account as provisional expenses under items of expenditure and also disclosed as liability in Balance Sheet. The provisions are utilized and reversed as and when the actual warranty expenses are incurred by the appellant. 7.3 The Department has merely referred to the provision of this anticipated expense maintained in their books of accounts in accordance with AS--29 and alleged that the same is consideration received by the appellant from HIL Germany for providing maintenance and repair services during warranty period. The Ld. Counsel argued that the allegation raised in the SCN is completely baseless and not in accordance with the agreement entered by the appellant and the parent company. In the earlier round, the....
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.... that the major part of the demand has been raised and confirmed by invoking the extended period alleging that there was suppression of facts with intent to evade payment of service tax on the part of the appellant. There is no suppression as the appellant was not required under any law to disclose to the department as to the warranty provision made by the appellant in their books of account for the warranty services provided by them without receiving any consideration. Whenever the appellant was liable to pay service tax, the appellant has disclosed the same and also paid the service tax. The information of provision of warranty income has been received by the department from the financial statements maintained by the appellant. This would clearly show that the appellant had no intention to suppress any information. It is argued by the Ld. Counsel that there are no ingredients for invoking the extended period. The decision in the case of Kalya Constructions Private Limited Vs CCE Udaipur -- 2023 (12) TMI 1211 -- CESTAT NEW DELHI and Raghuvar (India) Ltd. Vs CCE Jaipur -- 2023 (1) TMI 932 -- CESTAT NEW DELHI were relied by the Ld. Counsel to argue that the demand raised invoking th....
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....tual. It is an admitted fact that based on the entry made in the book of accounts of the appellant; the LAA has demanded service tax on the warranty commission. The method, the appellant has adopted for excluding warranty portion from the commission for the period April 06 to March 07 and April 07 to March 08 while applying for refund with the department may be a touchstone to test the veracity of the appellant's claim in the present case and vice versa. It may also be used to ascertain the correctness of the computation adopted for confirming the present demand relating to the earlier period from 1.7.03 to 31. 12.06. Therefore in the interest of fairness and justice, I remand the case back to the LAA for undertaking an appropriate computational exercise coupled with an analytical study and pass such order as he deems fit on merits, following due process of law and by observing the principles of natural justice. The appeal is disposed of by way of remand to the LAA." 12. Even after remand, the department has not been able to establish that any separate consideration is received by appellant over and above the commission income. From the SCN, it can be seen that the demand ha....