Case Law Details
M/s. R.K. Cylinders Vs Commissioner Of Central Tax (CESTAT Bangalore)
Going by the activity undertaken by the appellants as per the tender agreement, it is seen that he is not covered under (i) as above. Moreover, he is not a manufacturer of cylinders or he is not any person authorized by a manufacturer. It is not understood as to how the Revenue felt that the services undertaken by the appellants are covered under ‘Maintenance or Repair Service’ during the relevant period. As submitted by the appellant, the Department of Explosives have categorically declined permission for hot repairs of LPG cylinders as he was not a manufacturer. Therefore, the appellants cannot be held to be undertaking the services chargeable under ‘Maintenance and Repair Service’ as an agent of manufacture also. It is found as per tender that the repainting, etc., undertaken by the appellants is to maintain the colour coding required for the maintenance of standards of safety as categorically brought out in para 15.0, 15.1 and 18.0 in the terms and conditions of the tender. Therefore, it appears that they are not covered by clause (ii) also.
FULL TEXT OF THE CESTAT JUDGMENT
M/s. R. K. Cylinders, the appellants, are engaged in the business of testing of LPG cylinders which includes activities of segregation of cylinders, statutory inspection hydro testing, pneumatic testing. They also undertake surface preparation, repainting, punching and stenciling of details of logos of their clients and returning these to various oil companies. The Department initially issued a show-cause notice dated 29.12.2005 demanding service tax on the activities of restoration and painting under the heading ‘Technical Testing and Analysis Services’ alleging undervaluation. A show-cause notice was dropped. Then, the Joint Commissioner of Service Tax issued show-cause notice dated 30.1.2006 demanding service tax on the activity of restoration and painting of cylinders and affixing logo on cylinders under the heading ‘Maintenance and Repair Service’. However, the Joint Commissioner has dropped the proceedings.
2. The Commissioner of Service Tax, Bangalore, in exercise of powers under Section 84(1) of the Finance Act, 1994 issued two show-cause notices dated 24.12.2008 and 20.2.009 demanding an amount of Rs.5,23,322/- and Rs.60,087/- as service tax on the ground that the activities of surface preparation, repainting cylinders, bunching of stenciling of details and stenciling of logo, etc., is covered under the heading ‘Maintenance and Repair Service’. Commissioner vide Orders-in-Review No.18/2009 dated 18.3.2009 and No.01/2009 dated 9.1.2009 confirmed the demands raised therein with interest and penalty. Hence, these appeals.
3. The learned counsel for the appellants has submitted that painting is a ‘works contract’ and appellants have already discharged service tax/VAT on the activity of painting; therefore, the question of levy of service tax on the same would not arise at all. It is only with effect from 1.6.2007 the works contract services are made liable to service tax. He relied upon decision rendered in the case of Larsen & Toubro Ltd.: 2015 (39) STR 913 (SC).
3.1 He also submitted that the heading ‘Maintenance or Repair Services’, during the relevant period does not include reconditioning or restoration of goods, which was inserted only from 16.6.2005. He relied upon CBEC Circular No.B1/6/2005-TRU dated 27.7.2005 and Sharda Udyog vs. CCE: 2015 (39) STR 1036 (Tri.-Del.).
3.2 The counsel further contended that work order for testing cylinders and painting or repainting the same is not an maintenance contract and therefore, the activity does not get covered under the heading ‘Maintenance and Repair Service’ during the relevant period. He relied upon the following decision:
- Aditya Vidyut Appliances vs. CST: 2018 (11) GSTL 353 (Bom.)
- CCE, Jaipur vs. Dusad Transformer & Switchgears (P) Ltd.: 2007 (5) STR 37 (Tri.-Del.)
- Uni Power System Ltd. vs. CCE, Cochin: 2007 (7) STR 590 (Tri.-Bang.)
- Cochin Shipyard vs. CCE: 2009-TIOL-1129-CESTAT-BANG.
- Sharda Udyog vs. CCE, Ghaziabad: 2009 (15) STR 186 (Tri. – Del.)
3.3 He further submitted that the activity undertaken by them is only surface preparation, painting or repainting, which cannot be held to be repairs and maintenance. He relied upon:
- Universal Cylinders Ltd. vs. CCE, Jaipur: 2009 (14) STR 745 (Tri.-Del.)
- CCE vs. Bhiwadi Cylinders Pvt. Ltd.: 2008 (11) STR 37 (Tri. – Del.)
3.4 The learned counsel submitted that Commissioner has erred in the Order-in-Original in confirming the demands on the sole ground that the lower authority has ignored sub-clause (ii) which reads as follows:
(ii) a manufacturer or any person authorized by him, in relation to maintenance or repair or servicing of any goods’.
3.5 Ld. Counsel submitted that the appellant is neither a manufacturer of cylinders nor a person authorized by such manufacturer, therefore, the above said clause does not apply. To substantiate his claim, he has quoted a letter from the Department of Explosive which stated that since the appellants were not manufacturers, the requested permission for hot repairs of LPG cylinder is not permitted.
3.6 He also submitted that the order of the Commissioner has travelled beyond the scope of original show-cause notice as the order is confirmed based on the new grounds and chargability under a different category of service. he has relied upon Carrier Aircon Ltd.: 2005 (184) ELT 11 (SC) and Toyota Kirloskar Motor Pvt. Ltd. vs. CST: 2009 (13) STR 72 (Tri.-Bang.).
3.7 He submitted the following:
(i) Service tax is not sustainable as Section 67 of the Act for the relevant period clearly provides for the exclusion of value of materials or parts sold.
(ii) Assuming but not admitting that the activity of painting is liable for service tax, they are eligible for CENVAT credit on the materials used with effect from 10.9.2004 and exemption under Notification No.12/2003.
(iii) Some invoices have been added up twice.
(iv) Show-cause notices are made on assumptions and are hit by limitation.
3.8 He placed reliance on the following case laws to support their claim.
- CCE vs. Advantage Media Consultant: 2008 (10) STR 449 (Tri.-Kol.)
- CST vs. Prompt & Smart Security: 2008 (9) STR 237 (Tri.-Bang.)
- Oudh Sugar Mills Ltd. vs. UOI: 1978 ELT J172
- Shakshi Mafkin Pvt. LTd. vs. CCE: 2016 (343) ELT 972 (Tri.-Chan.)
- Shilpa Colour Lab vs. CCE: 2007 (5) STR 423 (Tri. – Bang.)
- LSG Sky Chefs (India) Pvt. Ltd. vs. CST: 2008 (12) STR 58 (Tri.-Bang.)
- CST vs. Vintech Business Solutions: 2017 (7) GSTL 371 (Tri.-Chen.)
- Firepro Systems Pvt. LTd. vs. CST: 2008 (10) STR 606 (Tri.-Bang.)
- Nizam Sugar Factory vs. CCE: 2006 (197) ELT 465 (SC)
- Hyderabad Polymers Ltd. vs. CCE: 2004 (166) ELT 151
- Shriram Holographics vs. CCE: 2016 (331) ELT 612 (Tri.-Del.)
- CST vs. Gamma Consultancy Pvt. Ltd.: 2006 (4) STR 591 (Tri.-Mum.)
- CCE vs. Shield Security Services: 2007 (5) STR 97 (Tri.-Del.)
4. The Departmental Representative has reiterated the findings of Order-in-Original.
5. Heard both sides. The brief issue for consideration in the instant case is as to whether the activity undertaken by the appellants amounted to ‘maintenance and repair service’ during the period 1.7.2003 to 31.3.2005. As per Section 65 (64) of Finance Act, 1994, ‘Maintenance or Repair Service’ means any service provided by-
(i) Any person under a maintenance contract or agreement; or
(ii) a manufacturer or any person authorized by him, in relation to maintenance or repair or servicing of any goods or equipment, excluding motor vehicle.
5.1 Going by the activity undertaken by the appellants as per the tender agreement, it is seen that he is not covered under (i) as above. Moreover, he is not a manufacturer of cylinders or he is not any person authorized by a manufacturer. It is not understood as to how the Revenue felt that the services undertaken by the appellants are covered under ‘Maintenance or Repair Service’ during the relevant period. As submitted by the appellant, the Department of Explosives have categorically declined permission for hot repairs of LPG cylinders as he was not a manufacturer. Therefore, the appellants cannot be held to be undertaking the services chargeable under ‘Maintenance and Repair Service’ as an agent of manufacture also. It is found as per tender that the repainting, etc., undertaken by the appellants is to maintain the colour coding required for the maintenance of standards of safety as categorically brought out in para 15.0, 15.1 and 18.0 in the terms and conditions of the tender. Therefore, it appears that they are not covered by clause (ii) also.
5.2 Moreover, we find that the issue is no longer res integra as it was held by the Tribunal in the case of Harshitha Handling vs. CCE: 2010 (19) STR 596 (Tri.-Del.) that the appellants are undertaking periodical test and upkeeping of cylinders in terms of Indian Explosives Act, 1884. We also find that Tribunal in the case of Bhiwadi Cylinders Pvt. Ltd. (supra) held in para 6 as under:
“6. In the present case, the respondent is only undertaking repair of the old cylinders. Contract for maintenance is distinct from a contract for repair. Maintenance involves periodical checkups and services to prevent failure of the machinery. Repair arises after the machine fails or gives problem. Maintenance may or may not involve repair. There may be cases where no repair need be undertaken of the machinery during the entire period of maintenance contract. Maintenance is in the nature of preventive action. Admittedly, the respondent was only repairing old gas cylinders and for taking such repair, they have entered into a rate contract. This contract for repair cannot be treated as a contract for maintenance. Further, the Board’s circular dated 27-7-2005, which has been relied by the Commissioner (Appeals) clarifies that when only repair work was undertaken without a maintenance contract then service tax was not attracted for the period prior to 16-6-2005.”
6. In view of the above, we allow the appeal with consequential relief, if any.
(Order was pronounced in Open Court on 04.09.2018.)
Source- M/s. R.K Cylinders Vs Commissioner Of Central Tax (CESTAT Bangalore); ST/208/2009-DB & ST/522/2009; 04/09/2018
