TMI Blog2024 (4) TMI 326X X X X Extracts X X X X X X X X Extracts X X X X ..... SOLES INDIA PRIVATE LMITED VERSUS THE COMMISSIONER OF CENTRAL EXCISE, GOA AND M/S LAXMI TYRES VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE [ 2017 (1) TMI 1110 - SUPREME COURT ] and Notification No 12/2003-ST as amended, the value of the material consumed in provision of the service needs to be excluded and the demand needs to be re-quantified. For the purpose of re-quantification of demand after excluding the value of the material consumed the matter needs to be remanded back to the Original Authority for determination of correct taxable value and service tax payable thereon. Other determination vis- -vis interest and penalty will depend upon the taxable value determined and the service tax short paid if any, under the category of management, maintenance and repair service. Matter is remanded back to the Original Authority - appeal allowed by way of remand. - HON BLE MR. P. K. CHOUDHARY , MEMBER ( JUDICIAL ) And HON BLE MR. SANJIV SRIVASTAVA , MEMBER ( TECHNICAL ) Shri Dharmendra Srivastava , Chartered Accountant ( Amicus Curiae ) for the Appellant Shri Sandeep Pandey , Authorized Representative for the Respondent ORDER SANJIV SRIVASTAVA : This appeal is directed against Order-In- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice tax registration No. AADCP4971DSD003 dated 22.03.2012 for the same 2.2 On the basis of the information contained in the balance-sheet of the appellant, Revenue was of the view that the services provided by the appellant were classifiable under Management, Maintenance and Repair Service Erection, Commissioning and Installation Service . 2.3 Accordingly during the period 2007-08 to 2011 for the services provided under this category appellant have short paid the service tax as indicated in table below : - Amounts are in Rs S No Financial Year Amount as per the balance sheet Total Taxable amount as per Mandi Parishad SGPGIMS Rate of Service Tax % Taxable value as per section 67 of the Finance Act, 1994 Amount of Service Tax not paid Amount of Education Cess not paid Amount of Secondary Higher Education Cess not paid Total Service Tax not paid 1 2007-08 6052650 1400439 12.36 7453089 894371 17887 8944 921202 2 2008-09 10655580 1408080 12.36 12063660 1447639 28593 14476 1491068 3 2009-10 12235595 1389600 10.3 13625195 1362520 27250 13625 1403395 4 2010-11 37358388 2898990 10.23 40257378 4025738 80515 40257 4146510 66302213 7097109 73399322 7730268 154605 77302 7962175 2.4 A show caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l is called on for hearing, the Tribunal may, in its discretion, either dismiss the appeal for default or hear and decide it on merits : Provided that where an appeal has been dismissed for default and the appellant appears afterwards and satisfies the Tribunal that there was sufficient cause for his non-appearance when the appeal was called on for hearing, the Tribunal shall make an order setting aside the dismissal and restore the appeal. 3.2 On the request of the Bench Shri Dharmendra Srivastava, Chartered Accountant argued on behalf of the appellant as amicus curiae and Shri Sandeep Pandey Authorized Representative argued for the Revenue. 3.3 Arguing for the appellant on the basis of records, amicus curiae submitted that the issue involved in this appeal is ➢ with regards to a determination of correct classification of the services and taxable value for the purpose of levy of service tax. ➢ In case the services provided by the appellant are held to be classified under works contract service as claimed by the appellant then the taxable value during the relevant period should have been determined in terms of works contract composition scheme, 70% abatement and after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cussed that the services provided by the appellant could not be classified under works contract service. He relied upon decision of the Hon ble Supreme Court in the case of M/s Kone Elevator India Pvt. Ltd. [2014 (34) S.T.R. 641=2014 (304) E.L.T. 161 (S.C.)] and concluded that the argument made by the appellant vis- -vis classification under works contract services cannot be upheld. However, the entire order is silent with regards to the determination of the value of the services after alleging abatement of the material. 4.3 Notification No.12/2003-ST dated 20-6-2003 is reproduced below for ready reference:- Valuation (Service Tax) Goods and materials sold by service provider to recipient of service Value thereof, exempted In exercise of the powers conferred by section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts so much of the value of all the taxable services, as is equal to the value of goods and materials sold by the service provider to the recipient of service, from the service tax leviable thereon under section (66) of the said Act, subject to condition that there is docu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 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 contract. 4.9 In case of Agrawal Colour Advance Photo System [2020 (38) G.S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 5. Section 67 of the aforesaid Act deals with valuation of taxable services and specifically mentions that the same does not include the cost of parts or other material, if any, sold to the customer during the course of providing maintenance or repair service. 6. There is a Government notification Bearing No. 12/2003-S.T., dated 20th June, 2003 and a CBEC Circular dated 7th April, 2004 dealing with the instant matter which may also be noticed and extracted below : Notification No. 12/2003-S.T., dated 20th June, 2003. . 2. This notification shall come into force on the 1st day of July, 2003 (Notification No. 12/2003-S.T. dated 20-6-2003) CBEC Circular dated 7th April, 2004 I am directed to refer to your representation forwarded to Finance Minister vide letter dated 11-3-2003 and state that in terms of the notification 12/2003-S.T., dated 20-6-2003, the exemption in respect of input material consumed/sold by the service provider to the service recipient while providing the taxable service is available. However, the exemption is available only if the service provider maintains the records showing the material consumed/sold while providing the taxable service. The value of such mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1994 we cannot subscribe to the view held by the Majority in the Appellate Tribunal that in a contract of the kind under consideration there is no sale or deemed sale of the parts or other materials used in the execution of the contract of repairs and maintenance. The finding of the Appellate Tribunal that it is the entire of the gross value of the service rendered that is liable to service tax, in our considered view, does not lay down the correct proposition of law which, according to us, is that an assessee is liable to pay tax only on the service component which under the State Act has been quantified at 30%. 11. An argument has been advanced by Ms. Pinky Anand, learned Additional Solicitor General that there is no evidence forthcoming from the side of the assessee that the value of the goods or the parts used in the contract and sold to the customer amounts to seventy per cent (70%) of the value of the service rendered which is the taxable component under the State Act. The aforesaid argument overlooks certain basic features of the case, namely, the undisputed assessment of the assessee under the local Act; the case projected by the Department itself in the show cause notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived raw materials intended for Retreading and they had paid only the Retreading charges for carrying out the Retreading activity. The invoices which the appellant assessee has also brought on record by way of illustration show the break up of the gross value received. There is again no contest to the same. Leaving aside the question that the case now projected, with regard to lack of proof of incurring of expenses on goods and materials which has been transferred to the recipient of the service provided, appears to be an afterthought, even on examination of the same on merits we have found it to be wholly unsustainable. 4.11 In terms of the above decision and Notification No 12/2003-ST as amended, the value of the material consumed in provision of the service needs to be excluded and the demand needs to be re-quantified. For the purpose of re-quantification of demand after excluding the value of the material consumed the matter needs to be remanded back to the Original Authority for determination of correct taxable value and service tax payable thereon. 4.12 Other determination vis- -vis interest and penalty will depend upon the taxable value determined and the service tax short p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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