Where there was no separate maintenance/repair contract between the parties, the Commissioner had rightly held that in the absence of any maintenance & repair contract, the demand based on rate or value contract work was not sustainable.
CESTAT, WEST ZONAL BENCH, AHMEDABAD
Neo Structo Construction Ltd. Vs. CCE
Appeal No. ST/189 & 191/2007,
Decided on March 18, 2010
RELEVANT EXTRACTS:3. The facts of the case are that NSCL is engaged in fabrication of structures at site for their various clients such as M/s Reliance Industries Ltd., M/s Essar Steel Ltd., M/s Essar Construction Ltd., M/s L&T etc. Investigation was started and during investigation, statements of officials and directors of the appellant company were recorded.
4. The statement of Shri Kattuputtur Balasubramanian Viswanathan, Director of NSCL was recorded wherein he stated that they were engaged in specialized fabrication and erection of structures, pipings, equipments, etc. used in setting up industrial projects at the client’s sites like M/s Reliance Industries Ltd., M/s Essar Steel Ltd., M/s Tata Honeywell Ltd., M/s L&T,, M/s Bharat Petroleum Corporation :Ltd., etc. that they were undertaking the job of fabrication and erection works and repairs and maintenance works relating to the industrial plants/ projects/machinery, and they were registered with the Department for providing the services under the category of “Maintenance or Repair Services’ since 22.07.2003. Statements of some officials were also recorded.
5. It was further found that NSCL had executed work order for fabrication of structure/pipes/equipments and erection of fabricated structures, piping, and equipments. However, they did not register themselves for rendering ‘Erection, Commissioning or Installation Services’ till 01.09.2005 and had obtained registration as a service provider for ‘maintenance and repair service/
6. It was also found that under the various work orders issued under this Annual Rate Contract/Contract Order such as fabrication, erection sand blasting and painting, the appellants also undertook maintenance and repairs of such fabricated structures etc. at pre-determined rates. Therefore, a show cause notice was issued proposing levy of service tax for ‘Maintenance & Repairs Service’ for the repairs and maintenance executed by the NSCL to their various clients as per works contract and proposing levy of service tax on other items of work executed by them under “erection, commissioning or installation service.”
7. In the impugned order, the demand of service tax on taxable service of ‘Erection, Commissioning or Installation’ was confirmed for the period from “01.07.03 to 31.07.05 and the demand on account of ‘maintenance and repairs services’ was dropped by the adjudicating authority.
8. Aggrieved from the said adjudication order, both M/s NSCL and the Revenue have come in appeal. We find that there are two issues involved in this case:
(i) Whether NSCL is liable to pay the service tax for ‘Maintenance & Repairs Service’ in the facts and circumstances of the case or not?
(ii) Whether NSCL is liable to pay the service tax under the category of ‘Erection, Commissioning & Installation Service’ in the facts and circumstances of the case or not?
9.0 We take up the issue No.(i) first.
9.1 The Revenue has challenged the impugned order on the ground that there is a maintenance or repair work carried out by the appellants is on the basis of maintenance/repair agreement which though is part of the works contract, can be separated (that is to contract is divisible.) The jobs like SS valve erection, Control Valve erection, FRP piping removal, titanium piping, anodizing & erection, pinhole repair, weld repair for purification reactor, baffle inspection, replacement of tubes, refractory castings, catalyst replacement, repair of transition assembly, joint erection & dismantling of 12 layers of coil for rectification etc. are in the nature of maintenance or repair of machines or equipments. Work of Maintenance or Repair is at predetermined rates but takes place after such installation or commissioning of machines, equipments, structures etc. Learned SDR submitted that the contract is divisible. Appellants undertake repairs and both the parties; are bound to each other at a predetermined price as regards maintenance/ repair. Therefore, service of maintenance/repair is separately leviable to service tax.
9.2 On the other hand,’Shri V. Sridharan, Advocate, learned counsel for NSCL submits that there is no separate contract between the parties for the services of maintenance or repairs at the relevant time. Hence, they are not liable to pay the service tax.
9.3 After hearing both the parties, before taking any decision, it is appropriate to examine the applicability of provisions of service tax law with this regard. The period involved in this case is 01.07.03 to 31.07.05. As per Section 65 (64) of Finance Act, 2003, the definition of Maintenance or Repairs is as under:
(64) “maintenance or repair’ means any service provided by –
fi) 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;”
and there is no change in the year 2004. In the year 2005, the definition of Maintenance & Repairs underwent a change and the revised definition was
(64) “maintenance or repair” means any service provided by –
(i) any person under a contract or an agreement; or
(ii) a manufacturer or any person authorized by him, in relation to-
(b) maintenance or repair including reconditioning or restoration, or servicing, of any goods or equipment, excluding motor vehicle; jor
(c) maintenance or management of immovable property;”
9.4 From the definitions, it is quite clear that prior to 16.06.05 maintenance and repairs service is liable to service tax, only when it is to be provided under a specific maintenance/repair contract or agreement and after 16.06.2005, maintenance/repair service rendered by any person under a contract or agreement (not necessarily a contract/agreement for maintenance repair) would be liable to service tax. Therefore, the question boils down to whether in the facts and circumstances of this case, it can be said that maintenance/repair service was provided under a maintenance contract or agreement.
9.5 The adjudicating authority has relied on the decision of this Tribunal in the case of CCE Vs. M/s Dusad Transformers & Switchgears (P) Ltd. as reported in 2007 (5) STR 37 (Tri-Delhi). In that case, it was held that “It is a work contract. The contract provides rates for repair of transformers and also provides guarantee for the transformers repaired by the respondents. As per Board’s Circular dt.27.7.05, prior to 16.06.05 repair of service carried out under the contract other than the maintenance contract or agreement was not covered within purview of service tax. In absence of any maintenance contract, we find no infirmity in the impugned order. The appeals filed by the Revenue are dismissed.” We find this decision applicable to facts of this case also.
We have gone through the decision of this Tribunal in the case of M/s Uni Power System Ltd. Vs. CCE as reported in 2007 (7) STR 590 (TrirBang.), wherein the issue was decided in favour of the appellant following the findings of this Tribunal in the case of M/s Cochin Shipyards Ltd. as reported in 2007 (7) STR 291 (Tribunal). Relevant portion is extracted below:
“We have gone through the records of the case carefully. The appellants carry out repair/maintenance of ships. However, it is not disputed that they do not have any maintenance contract with their customers. In these circumstances, the Government’s circular referred to supra by the learned advocate is clearly applicable. In other words, in the absence of a maintenance contract prior to 16.6.2005, the appellants are not liable to pay service tax. The Director General of Service Tax has given some clarification, the Adjudicating Authority has relied on the same without putting the appellants to notice. This is bad in law. Moreover, the clarification of the Director General is contrary to the instructions of the government. The entire period of dispute is prior to 16.6.2005. After the amendment on 16.6.2005, the appellants are paying service tax. It has been clarified by the Government that even if maintenance is carried out under any contract apart from other services, the appellant is not liable to pay service tax prior to 16.6.2005. In order to levy service tax prior to 16.6.2005, a pure maintenance contract is a must. In the present case, there is no evidence that the appellant had entered into a maintenance contract with their customers. There is substance in appellant’s contention that the nature of the services rendered by them amounts to work order: The adjudicating authority liimself has stated the argument of the party prima facie is justifiable. After stating his view, he has committed volte face by relying on Director General of Service Tax’s clarification. The appellants are not liable to pay service tax for the period prior to 16.6.2005, in the absence of a maintenance contract with their customers. In any case, no penalty is leviable on the appellants in the circumstances of the case. In the result, we set aside impugned order and allow the appeal with consequential relief “
In this case also, there is no dispute about liability of the appellants after 16.06.2005.
9.7 We have also gone through the Board’s circular No.Bl/6/2005-TRU, dt.27.7.05. The circular has clarified as under:
“16.4 Prior to 16.6.05, maintenance or repair carried out under a maintenance contract or agreement was covered under service tax. Repair or servicing carried out under a contract other than a maintenance contract or agreement was not covered within the purview of service tax. Maintenance or repair, including reconditioning or restoration or servicing of any goods or equipment, except motor vehicle (which is taxable under the category of authorized service station), undertaken as part of any contract or agreement (not necessarily maintenance contract or agreement) is now liable to service tax under the category of taxable service. To attract service tax under this category, the contract or agreement need not necessarily be a maintenance contract/agreement.”
9.8 This circular also supports the view that the service of maintenance and repair should be under a Maintenance or Repair Contract/Agreement to attract levy of service tax prior to 16.06.2005.
9.9 We find that in the present case, there was no separate maintenance/repair contract between the parties. The Department’s case is that the contract/agreement/work order can be segregated into two contracts by vivisecting the works contract. However, to vivisect, we have to see the agreement and see what was the intention. There is no finding/evidence/observation flowing from the agreement that both parties intended repair/maintenance is a separate part and has to be treated as such. |The Commissioner haw rightly held that in the absence of any maintenance & repair contract, the demand based on rate or value WIS-1 contract work is not sustainable.
9.10 We do not find any infirmity in the impugned order in dropping the demand by the Commissioner for maintenance & repair services. Accordingly, we do not find any merit in the appeal filed by the, Revenue and the same is rejected.