TMI Blog2018 (5) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... es in question do not qualify under the category ‘Business Auxiliary Service’ - appeal of Revenue dismissed. Whether the activity undertaken by M/s. Xerox are properly classifiable under Works Contract or not? - Held that: - 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 - The activities undertaken by M/s. Xerox under various contracts in question for Maintenance and Repair and XGS i.e. 'Business Support Service'/‘Business Auxiliary Service’ do not qualify as taxable service under Works Contract service, under Section 65 (105) (zzzza) of Finance Act, 1994, during the period - M/s. Xerox is not liable to pay service tax under the category of Maintenance and Repair service/ 'Business Support Service'/‘Business Auxiliary Service’. Whether interest can be demanded and penalty can be imposed against M/s. Xerox? - Held that: - As no demand is sustainabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-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 and Repair Services as maintenance contract executed by the appellant involve both, material and labour and is liable to Works Contract Tax under Sales Tax/ VAT provisions of respective States and the Hon ble Apex Court has examined the contract in question, reported in Xerox Modicorp vs. State of Karnataka (2005) 7 SCC 380 wherein it was held that supply of material in the FSMA contract are to be sale as it amounts to transfer of property. As per State Sales Tax/VAT provisions prescribed a standard percentage deduction towards labour portion of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 notification and has given the same findings as given with regard to SSMA and FSMA contracts, that as M/s. Xerox is using a presumptive value to discharge its VAT liability, the same value cannot be used to discharge service tax liability. As the said findings are factually incorrect as the percentage of material consumption for each type of XGS contracts mentioned above was worked out based on actual value of material supplied and consumed under those contracts. It is his submission that M/s. Xerox was paying service tax on pre-deter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice 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 involves only printing of bills/ invoices for their client and M/s. Xerox is not providing billing service to their clients and is only concerned with printing of bills which is not classifiable under Business Auxiliary Service . He relied on the Department s letter No. 334/4/2006-TRU dated 22.02.2006 which clarifies that the outsourced business activities fall under Business Support Service. He also relied on the decisions in Atlas Documentary Facilitators Company (P) Limited vs. CST, Mumbai 2017 (50) STR 22 (Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 pre-deposit. Therefore, he submits that the impugned order qua dropping demand against M/s. Xerox be set-aside. 8. Heard the parties and considered the submissions. On careful consideration of the submissions made by both sides, we find that following issues emerges for our consideration:- (a) Whether the activity undertaken by M/s. Xerox for various contracts for Maintenance and Repairs do qualify as Maintenance or Repair Service, or not? (b) Whether the service namely, XGS shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is 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 sold during the provision of the service. Whenever, any service is provided if in the course of the provision of the service certain materials are used they will definitely be considered as sale. This is clearly covered by the Constitutional Article 366 (29) (B) cited by the learned Advocate. We do not agree with the learned Commissioner that the said Constitutional provision has no application here. The Maintenance and Repair Contract entered by the appellant with their customers has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 prospective customer or vendor, public relation services, management or supervision. The case of the Revenue is that the activity undertaken by M/s. Xerox is covered Clause (iv) of the definition prior to 10.09.2004, 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. The main emphasis is on the billing and therefore, it is better to examine one of such act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erated. 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 provided in relation to business or commerce including inter alia accounting and processing of transactions, infrastructural support services and other transaction processing. In view of the definition of the expression Support Service of business or commerce under Section 65(104c) of the Act, we are satisfied that the interpretation of the provision and application of the said provision to the transactions of the respondent-assessee is a fair view of the provision and calls for no interferen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken 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, transport terminals, bridges, tunnels and dams. Explanation : For the purposes of this sub-clause, works contract means a contract wherein, - (i) Transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and (ii) Such contract is for the purposes of carrying out, - (a) Erection, commissioning or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise, installation of ele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act. 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 . In fact, by way of contrast, Section 67 post amendment (by the Finance Act, 2006) for the first time prescribes, in cases like the present, where the provision of service is for a consideration which is not ascertainable, to be the amount as may be determined in the prescribed manner. 26 . We have already seen that Rule 2(A) framed pursuant to this power has followed the second Gannon Dunkerley case in segregating the service component of a works contract from the goods component. It ..... X X X X Extracts X X X X X X X X Extracts X X X X
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