Thursday, 25 January 2018

A restricted remand was not sought by appellant as erroneously understood by Tribunal : High Court

THE appellant is a manufacturer of transformers and also undertakes maintenance and repair as well as commissioning and installation of the said transformers on which they discharge service tax liability. In addition to such activities, appellant undertakes repair of transformers of various States Electricity Boards by quoting on tender for such activity. Needless to mention that the transformers so received from the Electricity Boards are not manufactured by the appellant but some other manufacturers.  


The EA-2000 auditing team came to a conclusion that during the period 01.07.2003 to 31.03.2006, repairing activity undertaken in respect of transformers manufactured by other manufacturers is liable to service tax under the category of "maintenance or repair services".
The demand of service tax was confirmed with interest and equivalent penalty.
The CESTAT had granted a stay - 2013-TIOL-2145-CESTAT-MUM by observing thus -
ST - Appellant rendered repair services during the period 1.7.2003 to 31.3.2006 to various State Electricity Boards by undertaking repair of the Transformers - in respect of transformers manufactured by them and sold to the Electricity Board on which they undertook the repairs, they discharged ST liability - however, in respect of the transformers manufactured by other manufacturers on which they undertook repairs, they did not discharge ST liability, inasmuch as they had no maintenance contract for such repair work with their clients - SCN dated 25.5.2007 was issued demanding ST of Rs.2.37 crores by classifying the services under "Management, Maintenance or Repair Service"- demands confirmed along with interest/penalty - appeal to CESTAT: HELD - Tribunal in the case of Basant Enterprise - 2011-TIOL-1192-CESTAT-DEL held that rate contract entered into with the customers for the repairs of the goods for the period prior to 16.6.2005 cannot be considered as a maintenance contract or agreement and accordingly held that ST is not leviable on repair services prior to 16.6.2005 - similar view was held by this Tribunal in the case of Bhiwadi Cylinders- 2008-TIOL-833-CESTAT-DEL - in the light of these decisions, appellant has made out a strong case - pre-deposit waived, recovery stayed : CESTAT [para 5.1, 5.2]
The appeal was disposed thus -
ST - Maintenance or Repair services - No service tax liability arises on the appellant prior to 16.06.2005 on the activity of repairs undertaken on transformers received by them from various State Electricity Boards as the tender process through which the appellant got the contract for repairing the transformers is only a "work order" and contract for repair and it is not a "maintenance contract" - appellant chose to ignore the direction of the Superintendent In-charge to discharge tax liability, hence demand not hit by limitation - since issue is of interpretation, no penalty imposable, however, interest is payable on re-quantified tax liability arrived at after deducting cost of the material used while undertaking the repairs: CESTAT [para 6.3 to 6.7, 7]
The assessee is aggrieved by this order and has filed an appeal before the Bombay High Court. It is inter alia submitted that remand was not necessary at all moreso because the Tribunal had admittedly reached this conclusion upon a casual perusal of the invoices, as mentioned in paragraph 6.5 of its order; that if the demand itself was not sustainable and on the grounds which are mentioned in the grounds of appeal, duly highlighted, then, there was nothing to be remanded and for re-quantification.
After considering the submissions made, the High Court remarked that any expression of opinion would prejudice the case of both sides. It was also agreed by both sides that the matter should go back to the Tribunal itself and not to the adjudicating authority.
Thereafter, the High Court observed -
"15. We allow this appeal to the limited extent. We set aside that part of the order, which we have reproduced above i.e. para 6.5 and the ultimate direction in para 6.7 with regard to liability of the appellant to pay service tax post 15th June, 2005 and direct that even if the said service attracts tax and which is admissible and payable, its computation be done afresh in accordance with law. The tribunal should note all the contentions canvased before it insofar as this plea is concerned and by referring to the grounds in the memo of the appeal. It shall also take into consideration the pleas of the appellant, which are raised in the rectification of mistakes application. It should pass a fresh order after hearing the assessee as also the Revenue. The tribunal should only consider this aspect of the matter. We clarify that we maintain and uphold the order of the tribunal insofar as the rest of the issues are concerned."
The appeal was allowed in above terms, but by clarifying that all contentions on the issue sent back to the tribunal are kept open. 

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