Case Law Details

Case Name : International Combustion India Ltd. Vs CCE (CESTAT Mumbai)
Appeal Number : Appeal No. ST/85937/2015,ST/85887/2018
Date of Judgement/Order : 11/03/2019
Related Assessment Year :
Courts : All CESTAT (841) CESTAT Mumbai (162)

International Combustion India Ltd. Vs CCE (CESTAT Mumbai)

In the instant case the Appellants are receiving goods for refurbishing or repair from their customers as and when the need for repairs is felt by the customers of the appellants. There are two types of customers who are availing such services from the Appellants. Some customers have opted for the warranty/ guarantee scheme and some of them have not. The method followed by the Appellants is that in respect of the customers who have opted for the warranty/ guarantee the customers are not charged for the replacement of any parts, damaged, etc. In the other case the customers have charged for such parts. In either case, the Appellants are discharging the duty of Central excise on the spares/ parts used in repair and refurbishing on going through sample invoices it appears that the contention of the Appellant is correct. Though the service is rendered no remuneration for such repair and maintenance service is charged/ received by the Appellants. In the absence of consideration for the service rendered it cannot be argued that the Appellants are liable to pay service tax on such services provided by them. Arguably, service tax payment is necessary when the four things are satisfied;

(i) There is a service

(ii) There is a service provider

(iii) There is a service recipient

(iv) There is a consideration for such service paid by the recipient of service to the provider of the service.

In the instant case, among the above 4 only 3 conditions have been satisfied and 4th condition is not satisfied. In the absence of any consideration service tax cannot be charged obviously service tax cannot be charged on the value of the spare parts used for such repair or maintenance.

FULL TEXT OF THE CESTAT JUDGMENT

The Appellants, M/s International Combustion India Ltd, Nagpur are engaged in the manufacture of machinery and parts thereof falling under the heading 847410 of the Schedule of Central Excise tariff Act (CETA) 1985. The Appellants also undertake service of repair and maintenance of the machines to those buyers who opt for it. The repairs are usually carried out at the factory of the Appellant. The department has issued show cause notices to the Appellants demanding service tax alongwith interest & penalty and the same were confirmed by the lower authorities and were up held by Commissioner (Appeals) vide NGP/EXCUS/000/APPL/ 264-265/14- 15 dated 22/01/2015 & Order-in-Appeal No. NGP/EXCUS/000/APPL/552/1 7 dated 06/12/2017. Hence these appeals.

2. The Appellants submitted that the repair and refurbishing is done at the premises of the Appellants and if needed by changing repares and after reassembly and necessary testing machines are returned to their customers on payment of Excise Duty on the replaced parts. In case the goods are covered under the Appellants standard guarantee/ warranty period (12 months), refurbishing is done free of cost i.e. the spares are replaced and no amount is charged from customers and no service charge is recovered. However, excise duty is paid on the parts used in the repairs. In case the goods are returned beyond the guarantee/ warranty period when the refurbishing is done on chargeable basis. The charges are only for the cost of the replaced/ damaged parts. In such cases also no service charge is recovered therefore the services always free for the customers. The Appellant further submitted that the case was made out after a visit of the audit party. The general Manager in his statement has clearly stated that the service rendered is free of cost.

2.1 The appellant also submitted that service tax is leviable only on the service i.e. rendered for some consideration. If the service is rendered free of charge then there is no service tax recoverable. In the instant case the Appellant rendered service free of cost. Even the show cause notice says that the noticee used various bought out Cenvatable/ manufactured parts/ equipment for the aforesaid job and raised invoices charging the Central Excise duty therein. The Appellants relied upon the following cases;

(i) Kiran Motors Vs. CCE, Vadodra, 2009 (16) STR 74.

(ii) Hindustan Auto House Pvt. Ltd Vs. CCE, 2009 (13) STR 190

(iii) AVG Motors Ltd. Vs. CCE, 2008 STR 20

(iv) ASL Motors Pvt. Ltd. Vs. CCE, 2009 (9) STR 356

3. The Learned Authorised Representative has reiterated the findings of the order-in-appeal and order-in-original and sought to rely upon the case of Bata India Ltd. Vs. CCE and ST, Delhi 2018 (15) G.S.T.L. 339 (Tri.-Del).

4. Heard both sides and perused the records of the case. In the instant case the Appellants are receiving goods for refurbishing or repair from their customers as and when the need for repairs is felt by the customers of the appellants. There are two types of customers who are availing such services from the Appellants. Some customers have opted for the warranty/ guarantee scheme and some of them have not. The method followed by the Appellants is that in respect of the customers who have opted for the warranty/ guarantee the customers are not charged for the replacement of any parts, damaged, etc. In the other case the customers have charged for such parts. In either case, the Appellants are discharging the duty of Central excise on the spares/ parts used in repair and refurbishing on going through sample invoices it appears that the contention of the Appellant is correct. Though the service is rendered no remuneration for such repair and maintenance service is charged/ received by the Appellants. In the absence of consideration for the service rendered it cannot be argued that the Appellants are liable to pay service tax on such services provided by them. Arguably, service tax payment is necessary when the four things are satisfied;

(i) There is a service

(ii) There is a service provider

(iii) There is a service recipient

(iv) There is a consideration for such service paid by the recipient of service to the provider of the service.

In the instant case, among the above 4 only 3 conditions have been satisfied and 4th condition is not satisfied. In the absence of any consideration service tax cannot be charged obviously service tax cannot be charged on the value of the spare parts used for such repair or maintenance. It is not the department’s case that the Appellants have not discharged applicable Central Excise duty on the spare parts used by the Appellant in discharge of the service. The order-in-original and order-in-appeal have only cursorily mentioned that the Appellants are receiving consideration for the service rendered by them. However, as discussed above on going through the sample invoices it is seen that the Appellants submissions are correct.

5. We find that the department has not produced any evidence to the effect that the Appellants have received remuneration for such repair or maintenance service in the absence of the same no service tax is payable by the Appellants in the result no demands survive. We find that the case laws relied upon by the Appellant are squarely applicable. We follow the same and set aside the impugned orders and order consequential relief if any.

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