Service Tax - Exemption for maintenance and repair of Navy Vessels - Just because the appellant paid Service Tax on portion of gross receipts, exemption cannot be denied: CESTAT
By TIOL News Service
BANGALORE, NOV 03, 2014: THE impugned order has been passed taking a view that the appellant should have paid service tax on the gross value received for the services provided by them and discharge of service tax liability only on a notional percentage (about 30 to 40%) of the amount received from their customers has resulted in short levy of service tax and as a result for the period 2011-12, demand for service tax of Rs. 93,78,325/- has been confirmed against the appellant with interest. Further penalty under Section 76 has also been imposed. In addition to the above, penalties have been imposed under Section 77 also.
It was submitted by the assessee that:
1. 95% of services rendered by them are to undertake repair and maintenance of naval vessels.
2. maintenance and repair activity undertaken for Indian Navy is exempted under Notification No. 31/2010-ST dated 22.06.2010 (effective from 01.07.2010).
3. the claim has been denied only on the ground that appellant collected service tax and paid the tax to the Government on a portion of the gross receipt and therefore they are not eligible for the exemption.
4. the appellants had paid tax on service portion and remaining portion on which tax was not paid consists of supply of spares/components for the purpose of maintenance and repair.
6. the appellant had not discharged service tax and the work order issued by Indian Navy did not include service tax and the appellants had taken the amount received for the services rendered as cum-tax receipt and paid the tax and it is their claim that no service tax was charged or collected.
The Tribunal found that:
1. The decision of the Commissioner that appellant is not eligible for the benefit of notification just because they happened to collect service tax on a portion of the gross receipt and paid it to Government, renders them ineligible for exemption is totally unfair and incorrect.
2. Once the amount is collected and billed as service tax, it has to be paid to Government and in this case it has been rightly paid. Nevertheless just because an assessee shows some amount as service tax, collects the same and pays it to Government, if the whole activity is not liable to tax, just because he paid the tax would not render him ineligible for such exemption.
3. Therefore the decision taking a view that exemption notification benefit is not available to the appellant in respect of services rendered to Indian Navy cannot be sustained.
4. The appellant had clearly shown the value of spares used for maintenance/repair and a detailed statement giving the details of spares was also shown. If this is correct, the appellant would be eligible for the benefit of Notification No. 12/2003. Since the Commissioner has not considered this aspect on the ground that evidence was not made available, the matter should be remanded for consideration of this aspect afresh and on the basis of evidences produced by the appellants.
5. It is made clear that the Commissioner while passing the order should get whatever he requires for verification from the appellant, do the verification and come to a proper conclusion rather than making an observation that the appellants did not produce necessary documents.
The impugned order is set aside, benefit of exemption is allowed in respect of maintenance and repair service rendered to Indian Navy as per Notification No. 31/2010 and as regards other issues, the matter is remanded to the original adjudicating authority for fresh adjudication after observing principles of natural justice.
(See 2014-TIOL-2166-CESTAT-BANG)
