The Appellants are engaged in the manufacture of sugar mills machinery, heavy gears and steel casting, paper mill machinery, Diesel Engines etc. They also do de-shelling and re-shelling of old and worn out sugar mill rollers which are sent to them by various sugar mills when such rollers become old and worn out and requires reconditioning before further use.
The moot point in this appeal is whether such de-shelling and re-shelling is liable to service tax under the head “Maintenance or Repair” during the period July 03 to Nov 05.
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST BLOCK NO.2, R K PURAM, NEW DELHI-110066
Service Tax Stay No. 1228 of 2010
Service Tax Appeal No. 690 of 2010
M/s R C ENGG WORKS PVT. LTD.
Date of Decision: 4.5.2011
Appellant Rep by: Shri Rajesh Chhibber, Adv.
Respondent Rep by: Shri Sonal Bajaj, SDR
CORAM: Ashok Jindal, Member (J)
Mathew John, Member (T)
STAY ORDER NO. ST/278/2011
Per: Mathew John:
The Appellants are engaged in the manufacture of sugar mills machinery, heavy gears and steel casting, paper mill machinery, Diesel Engines etc. They also do de-shelling and re-shelling of old and worn out sugar mill rollers which are sent to them by various sugar mills when such rollers become old and worn out and requires reconditioning before further use. The moot point in this appeal is whether such de-shelling and re-shelling is liable to service tax under the head “Maintenance or Repair” during the period July 03 to Nov 05.
2. The activity of the re-shelling involves breading of the outer shell of the shaft and re-melting of the same. Invariably, some material is to be added by us as the old and used shell is not-sufficient to cast fresh shell. Said re-casted shell is then put on the shaft again and again by same process for number of times. Since the shell is re-melted it is argued that the activity cannot be considered as repair in true sense. It is further argued that the department initially wanted to levy duty on suph activity on the ground that the same amounted to manufacture and this fact would be sufficient to show that the said activity was reconditioning activity.
3. It is agreed that this activity does not amount to manufacture within the meaning of section 2(f) of the Central Excise Act.
4. As per section 65(64) of Finance Act 1994 the service subject to tax, during the relevant period read as follows:-
“Maintenance or repair” 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. With effect from 16.6.2005 section 65(64) has been substituted by the Finance Act, 2005 so as to read as follows;
“maintenance or repair” means any service provided by;
(i) any person under a contract or an agreement or
(ii) a manufacture or any person authorized by him, in relation to –
a) maintenance or repair including re-conditioning or restoration, or servicing of any goods or equipment excluding motor vehicle; or
b) maintenance or management of immovable property;
5. In view of the fact that re-conditioning is specifically included from 16-06-2005 they argue that for the previous period their activity can not be subjected to tax.
6. They rely on the clarification issued by Ministry vide letter F. No. B1/6/2005-TRU dated 27-07-2005. The relevant para is reproduced below:
“Prior to 16.6.2005, 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 this category of taxable service. To attract service tax under this category, the contract or agreement need not necessarily be a maintenance contract/agreement.”
7. The Appellants argue that the finding of the lower authority that there was no need for a maintenance contract when a manufacturer was doing repair is not correct in view of the following case laws;
1. 2007 (78) RLT 702 CCE vs. Dusad Transformers
2. 2007 (7) STR 590 Uni Power Corp. vs. CCE
3. 2008 (10) STR 295 Maheswari Transformers vs. CCE
4. 2008 (11) STR 37 CCE Vs. Bhiwadi Cylinder
5. 2009 (14) STR 45 Universal Cylinders
8. The Appellants also argue that the demand is time-barred because the notice is issued invoking the extended period of time. It is argued that when there is a dispute regarding legal interpretation of the scope of an entry suppression cannot be alleged.
9. It is also argued that when the audit party from the department noticed the matter in June 06, but the notice was issued in June 2007. This shows that the department itself was not sure of the scope of the entry. So allegation of suppression with intention to evade duty is not sustainable.
10. The Ld DR argues that the taxable entry as reproduced in para 4 above has two parts, one relating to service provided by any person under a contract or an agreement and another relating to service provided by a manufacturer or any person authorized by him. In the former part there is a requirement regarding a contract or agreement. In the latter part there is no requirement regarding contract or agreement. He argues that the clarification given by CBEC vide letter dated 27-07-2005 is in respect of the former and not in respect of repair done by a manufacturer. It is his submission that the case laws quoted have not examined this aspect and proceeded on the presumption that both the categories of persons are on identical footing.
11. Considered arguments on either side.
12. It is very clear that the taxable entry has two distinct parts as argued by the Ld. DR. The clarification dt. 27-07-2005 from CBEC does not talk about services provided by manufacturers. The decisions quoted do not examine this aspect. Prima facie we find that the service provided by the Appellant during the period under dispute was covered by the definition of taxable entry in force at that time. This clarification which came in July 2005 cannot be reason not to declare the value of taxable services from July 2003 and we are not quite convinced about argument on limitation.
13. So we order that appellant may make a deposit of Rs.3,00,000/- (Rupees Three lakhs) in addition to the amount of Rs.8,00,000/- already deposited by him within eight weeks from the order and report compliance on 13/05/2011. Subject to this, deposit of balance amounts due under the impugned order is waived and there shall be stay on collection of such amounts during the pendency of the Appeal.