By TIOL News Service

ERNAKULAM, MAY 26, 2014: THE appellant was served a letter dated 05/12/2007 by the Superintendent (Audit) inter alia stating that the appellant was required to pay service tax on the income received from the Customers for reconditioning of motor vehicle engines/repairing vehicle engines and other parts since the said service does not amount to reconditioning/repairing of motor vehicles which is excluded from the purview of 'Maintenance and Repair service'.

The appellant controverted the said stand on the ground that the activity of rebuilding or repair of engines and other parts of motor vehicles inter alia means maintenance or repair service of motor vehicles, and is, therefore, excluded from the purview of service tax liability.

Take a look at the definition of the taxable service when it was introduced w.e.f 16.06.2005 -

"Maintenance or Repairs' 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,--

(a) maintenance or repair including reconditioning or restoration or servicing of any goods or equipment, excluding motor vehicles; or

(b) maintenance or management of immovable property,

With effect from 01.05.2006 the definition of service of "Maintenance or Repairs" was further amended and the service is renamed as Management, maintenance or repair. As per Clause (64) of Section 65 of the Finance Act, 1994 'Management Maintenance or repair" means any service provided by;

i) any person under a contract or agreement; or

ii) a manufacturer or any person authorized by him, in relation to

a) management of properties, whether immovable or not

b) maintenance or repair of properties, whether immovable or not; or

c) maintenance or repair including reconditioning or restoration, or servicing of any goods, excluding motor vehicles,"

Be that as it may, in adjudication proceedings, the CCE, Cochin confirmed a Service Tax demand of Rs.67,28,530/- for the period from 16/06/2005 to 30/09/2007 by invoking the extended period of limitation.

In appeal, the Tribunal found that in respect of motor vehicles brought to authorised service stations or workshops by the vehicle owners for repairs/maintenance, the appellant was getting only the dismounted engines or other parts from such authorised service stations/workshops for undertaking the job works of repair/rebuilding etc. Such an activity falls within the ambit of 'maintenance or repair including reconditioning or restoration or servicing of any goods or equipment' and, therefore, it does not amount to repair or maintenance of "motor vehicle".

Further, the Tribunal observed that in respect of vehicles brought to the appellant's premises are concerned, the same amounts to maintenance or repair of motor vehicles, whereas if the engine or any other part is brought in a knock down condition for repair/maintenance/reconditioning etc., the appellant is not entitled for any exemption.

We reported the Stay order as 2010-TIOL-1755-CESTAT-BANG and the Final order as 2012-TIOL-1289-CESTAT-BANG.

Against this order of the CESTAT, the appellant is before the Kerala High Court.

The following substantial questions of law have been raised by the appellant -

"i) Is the Tribunal right in its finding that the Appellant is liable to service tax under maintenance or repair service upto 30/04/2006 and under "Management maintenance or repair service from 01/05/2006 with respect to the repair of parts of motor vehicles received by the Appellant from authorised service stations and workshops.

ii) Is the Tribunal right in its findings that to qualify for the benefits of exclusion of motor vehicle under the definition of maintenance or repair service upto 30/04/2006 and management maintenance or repair service from 01/05/2006, the motor vehicle itself had to be physically brought to the Appellant's workshop and that consequentially engine's or other parts of the motor vehicle brought by itself the work shop would not qualify for the exclusion and would therefore be liable to Service Tax.

iii) Is the Tribunal right in its findings that the demand of service tax on the services rendered by the Appellant to authorized service stations and workshops in respect of IC engines and other parts of motor vehicles is to be upheld.

iv) Is the Tribunal right in its finding with respect to limitation and invocation of the extended period under the proviso to Section 73(1) of the Finance Act, 1994 in the present case.

v) Is the Tribunal right in its findings that the penalty under Section 78 of the Finance Act, 1994 has been correctly levied in the present case.

vi) Is the Tribunal right in its findings that interest under Section 75 of the Finance Act is payable in the present case."

After hearing the extensive arguments and extracting the definition of ‘Motor Vehicle' as appearing in the Motor Vehicles Act, the High Court inter alia observed -

22. The Tribunal has proceeded on the basis that if a Motor vehicle was brought to the service centre of the appellant and thereafter the engine is dismounted and repaired, the appellant will be entitled for the benefit of exclusion as the appellant, in the process of repairing the vehicle, is repairing the engine of the vehicle as well. But, if a person brings the engine alone for repairs or for that reason any other part and necessary repairs are carried on, in that event, the appellant cannot claim the exclusion provided under the Statute. Therefore, in order to claim the exclusion, maintenance, repair, reconditioning, overhauling etc. should be "on the" motor vehicle and not in respect of "individual parts" of motor vehicle. In this case, it is evident that the petitioner was repairing, reconditioning, overhauling parts of a motor vehicle like I.C. engines and other parts. What exactly is charged for service tax is evident from the Statute itself. It is, maintenance or repair including reconditioning or restoration or servicing of any goods or equipment. Apparently, such goods or equipment includes motor vehicles also, but, in order to give the benefit to persons involved in maintenance or repair etc. of motor vehicles, such an exclusion is granted. The word exclusion apparently means excluding any maintenance or repair relating to a motor vehicle. A motor vehicle has several parts and if only a part of the motor vehicle requires maintenance or repair, can it be said that it is not maintenance or repair of a motor vehicle? The motor vehicle in question has to be dismounted at some place either in the workshop of the appellant or in the workshop of any other person or even at the residence of the customer in order to effect repairs. Once a part is repaired and it is thereafter fitted to the motor vehicle, it will have the character of a motor vehicle, which can be used on road. It is not in dispute that if the motor vehicle was brought to the service centre of the appellant and they themselves had dismounted the engine and repaired it and then refitted it to the motor vehicle, they are entitled for the exclusion. But exclusion is not given by stating that dismounting has taken place at a different place. Such a view, according to us, cannot be accepted on account of the fact that motor vehicle apparently includes all its parts as well. Without its individual parts, it does not become a motor vehicle. Such part cannot be used for any other purpose as well and it is normally fitted to the same vehicle from which it is dismounted. Therefore, if any service centre or maintenance centre or workshop does maintenance or repairs to any part of the motor vehicle, it is also entitled to get the benefit of exclusion, as provided under Section 65(64) of the Finance Act, 1994.

23. The argument that unless the engine or any other part is completely fitted to a motor vehicle, it cannot be qualified as a motor vehicle, might be true, when viewed from the angle of definition given to Motor Vehicles Act, 1988. Here, we are concerned with "exclusion" of the maintenance and repair of motor vehicle from service tax. If this view is taken, any workshop or small industry who carries on the repairs of either engine parts or any other part of a motor vehicle will not be eligible for exclusion. It is apparent that authorised service stations are not excluded from the purview of service tax. Therefore, the exclusion is intended for workshops which carry on the maintenance and repairs of motor vehicles. The word "exclusion" clearly indicates an act of preventing from entering a place or taking part in something. In tax parlance, it is an item of income excluded from gross income. When the Statute clearly intended to exclude motor vehicle, it is apparent that it excludes parts of motor vehicle also. If such an interpretation is not given, the very purpose of such exclusion will be rendered ineffective.

After holding in favour of the appellant on merits, on the point of limitation, the High Court observed that in view of the findings of fact by the Adjudicating authority that the assessee had not furnished all material details in their ST-3 returns and such details came to be disclosed only as a result of audit conducted by the department, the same cannot not be ignored and moreover there is no material to come to a different finding. The High Court justified the action of the department in invoking the extended period of limitation.

In the matter of penalty imposition, the High Court observed that the dispute was bona fide and the Tribunal finding on the same not proper.

The High Court, therefore, set aside the order of the Tribunal and allowed the appeal.

In passing: The difference between metonymy and synecdoche is very slight. A metonymy is the use of something whole that represents something else, whereas a synecdoche is the use of a part of something that represents something else.

(See 2014-TIOL-825-HC-KERALA-ST)