TMI Blog2018 (3) TMI 1006X X X X Extracts X X X X X X X X Extracts X X X X ..... be termed as Billing - the services in question do not qualify under the category Business Auxiliary Service. Whether the activities undertaken by M/s. Xerox under various contracts of Maintenance and Repair Service and Business Support Service are properly classifiable under Works Contract or not? - Held that: - The said issue has been examined by the Hon’ble Apex Court in the case of Larsen & Toubro Limited [2015 (8) TMI 749 - SUPREME COURT] wherein it has been held that prior to 01 June 2007, if the services have been provided along with material and the value of material supplied cannot be vivisected, in that circumstance, the appropriate classification of the service shall be Works Contract service and the same was not taxable prior to 01.06.2007. Therefore, for the period prior to 01.06.2007, no demand is sustainable under the category of Maintenance and Repair Service/ Business Support Service/ Business Auxiliary Service for the activity undertaken by M/s. Xerox as the services of Business Support Service and Maintenance and Repair along with material and the agreement cannot vivisect the amount of material supplied by M/s. Xerox. For the period post 01.06.2007, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07 and the show cause notices were issued to M/s. Xerox alleging that the deductions claimed by M/s. Xerox from the gross value received under the aforementioned service contracts is not permissible and they are liable to pay service tax on the gross amount received from the customers. The show cause notices were adjudicated, the adjudicating authority dropped the demand for Maintenance and Repair services and Business Support Service/ Business Auxiliary Service, for the period July 2003 to December 2006 and July 2003 to April 2006, respectively, as time-barred. He also dropped demand under Business Auxiliary Service. Both sides are in appeal against the impugned order. M/s. Xerox is in appeal against the order of confirming demands and imposing penalties whereas, Revenue is in appeal against the part of impugned order wherein certain demands have been dropped by the adjudicating authority, hence these appeals. 3. As both the appeals are arising out of a common order, therefore both the appeals are taken up for disposal by a common order. 4. Ld. Counsel appearing on behalf of M/s. Xerox submitted that M/s. Xerox has correctly discharged service tax liability on Maintenance an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal held that when the assessee paid VAT on an approximate value of 70% of the contract then service tax cannot be charged beyond 30% of the contract value. Therefore, he submits that the impugned order, to that account, is to be set-aside. He further submitted that the adjudicating authority did not allow M/s. Xerox to take abatement of the actual value of material of Business Auxiliary Service / 'Business Support Service' when it is proved that it is higher than the value of abatement availed by M/s. Xerox since VAT has been paid on the presumptive value only. Moreover, ld. adjudicating authority also did not allow M/s. Xerox to take the abatement of the presumptive value for the purpose of Maintenance and Repair services. He further submitted that M/s. Xerox has correctly discharged service tax on the labour portion in respect of Maintenance and Repair services. 5. Ld. Counsel further submitted that M/s. Xerox has correctly discharged the service tax liability for Xerox Global Services (XGS for short) under 'Business Support Service'. No separate findings with regard to XGS contract has been given in the show cause notice to deny the benefits of exemption n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract shall be for one of the specified purpose. He further submitted that the demands for the period Sept. 2006 covered in the show cause notice dated 27.02.2008 is time barred as the M/s. Xerox was duly filing ST-3 returns and department was in knowledge of its activities. He also submits that M/s. Xerox was under bonafide belief as it had discharged sales tax/ VAT liability on the value of materials and goods involved in the execution of the said maintenance and XGS contracts, there was no further liability of service tax on the same amount. He also relied on the decision of Parul Associates Interiors Pvt. Limited vs. CST, Bangalore 2016 (46) STR 373 (Tri. Bang.). He further submits that demand of interest and penalty are also not sustainable on merits. Therefore, it is his prayer that the impugned order qua demanding service tax along with interest and imposing penalty on M/s. Xerox are to be set-aside. 6. With regard to Revenue s appeal, he submits that M/s. Xerox has correctly classified XGS under 'Business Support Service' therefore, no liability arises for 'Business Support Service' rendered prior to May 2006. It is his submission that XGS contract involv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s done on pre-printed paper. The supply of plain paper or pre-printed paper for printing the final bills was part of XGS. The final printing of bills with variable data supplied by the customer on the pre-printed paper or on the plain paper was also being done under XGS. The other activities involved were copying, scanning and faxing. Some post printing activities were also undertaken M/s. Xerox, such activities, inter-alia, included sorting, stuffing, perforation etc. The consideration charged under these agreements were varied from agreement to agreement depending upon factor like ownership of the equipment on which printing was done, supply of paper, xerographic supplies involved in printing etc. Therefore, the said activity is covered under BAS under Section 65 (19) of Finance Act, 1994 with effect from 01.07.2003 and in that circumstance, the ld. Commissioner has fell in error to hold that activities undertaken by M/s. Xerox does not qualify as Business Auxiliary Service . To support his contention he relied on the decision in the case of Ricoh India Limited vs. CCE, Delhi 2011 (21) STR 68 (Tri. Del.) to say that in that case, this Tribunal directed the assessee to make the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sold. This view is not correct. The chartered accountant has actually given a certificate with regard to the consumption of materials. It is also not denied that in the course of the maintenance no material was used. In several decisions it has been held that service tax cannot be levied on that portion of the value on which sales tax has been charged. This position has been elaborately dealt with in the decision of the Shilpa Colour Lab case decided by this Bench and cited supra. This view has been affirmed in many decisions. Once, the sales tax has been paid on the materials, then on the same service tax also cannot be charged. In fact, the appellants had relied on the decision of the Hon ble Karnataka High Court which has been upheld by the Hon ble Supreme Court. In the Modi Xerox case it has been clearly held that in the Annual Maintenance Contract, the replacement of spares etc. would be considered as sale. Even in the present case, on 70% of the value sales tax has been paid and this has been accepted by the Government of Karnataka. This fact also cannot be ignored. Moreover, Notification No. 12/2003 dated 20-6-2003 clearly provides for exempting the value of the materials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onging to the client; or (ii) promotion or marketing of service provided by the client; or (iii) any customer care service provided on behalf of the client; or (iv) any incidental or auxiliary support service such as billing, collection and recovery of cheques, accounts and remittance, evaluation of prospective customer and public relations services. Section 65 (19) was amended with effect from 10th September 2004. The new version of the Section is as under; Business Auxiliary Service means any service in relation to, (i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or (ii) promotion or marketing of service provided by the client; or (iii) any customer care service provided on behalf of the client; or (iv) procurement of goods or services, which are inputs for the client; or (v) provision of service on behalf of the client; or (vi) a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e agreement between the assessee and Northern Orissa for spot billing activity also has a similar provision as the agreement with the Electricity Distribution Companies in Andhra Pradesh; that in all these cases billing and accounting is not done on behalf of electricity companies/departments but is for them; there is no interaction/communication with the customers; meter readings are required to be provided by the electricity department and these are to be entered into computer and data generated. The Tribunal reasoned that according to the definition Support Service of Business or Commerce [defined in Section 65(104c) of the Finance Act, 1994], service provided in relation to the business or commerce, including accounting and processing of transaction is covered. The Tribunal concluded on analysis of the agreements between the respondent-assessee and the Distribution Companies that billing is a transaction and when the meter reading is provided, the meter reading is entered and the bills are generated and that activity is correctly classifiable under the SSBC. 6. Section 65(104c) of the Finance Act, 1994 defines Support Service of business or commerce to mean services provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not taxable prior to 01.06.2007. Therefore, for the period prior to 01.06.2007, no demand is sustainable under the category of Maintenance and Repair Service/ Business Support Service/ Business Auxiliary Service for the activity undertaken by M/s. Xerox as the services of Business Support Service and Maintenance and Repair along with material and the agreement cannot vivisect the amount of material supplied by M/s. Xerox. 13. As we have hold that the activity undertaken by M/s. Xerox under various contracts, therefore for the period post 01.06.2007, the Maintenance and Repair and XGS services are under Works Contract, whether the services under Works Contract is taxable or not We find that for the first time Section 65 (105) (zzzza) set-out to tax the service as Works Contract service for levy of service tax on the works executed along with the material and the said condition is enumerated hereunder:- 11. By the Finance Act, 2007, for the first time, Section 65(105)(zzzza) set out to tax the following :- (zzzza) to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to in the charging Section 65(105) would refer only to service contracts simpliciter and not to composite works contracts. This is clear from the very language of Section 65(105) which defines taxable service as any service provided . All the services referred to in the said sub-clauses are service contracts simpliciter without any other element in them, such as for example, a service contract which is a commissioning and installation, or erection, commissioning and installation contract. Further, under Section 67, as has been pointed out above, the value of a taxable service is the gross amount charged by the service provider for such service rendered by him. This would unmistakably show that what is referred to in the charging provision is the taxation of service contracts simpliciter and not composite works contracts, such as are contained on the facts of the present cases. It will also be noticed that no attempt to remove the non-service elements from the composite works contracts has been made by any of the aforesaid Sections by deducting from the gross value of the works contract the value of property in goods transferred in the execution of a works contrat. 25. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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