ST - Refund - up-gradation activity undertaken by appellant of defence aircrafts did not amount to providing of Maintenance & Repair Services - since tax was not due to Exchequer, amount deposited as ST to be refunded: CESTAT
By TIOL News Service
ALLAHABAD, JAN 04, 2017: THE appellant had registered themselves under Maintenance & Repair Services for discharge of Service Tax.
They paid an amount of Rs.2,67,83,104/- for the activity of up-gradation of some of the aircrafts of defence forces through four contracts treating the same as Service Tax payable under Maintenance & Repair Services.
Subsequently, they realized that the up-gradation of Defence Aircrafts undertaken by them was not satisfying the definition of Maintenance & Repair Services but it was activity related to 'manufacture', therefore, through application dated 23-06-2006 they applied for refund of tax paid of Rs.2,67,83,104/-.
The Original Authority held that the appellant had voluntarily deposited Service Tax and the contract numbers mentioned by M/s Hindustan Aeronautics Limited in their refund claim were different from those mentioned on the invoices submitted along with refund claim and rejected the application for refund.
As the Commissioner (Appeals) upheld the o-in-o, the appellant is before the CESTAT.
The main ground of appeal is that the activities carried out under the up-gradation contracts were manufacturing activities and they had wrongly classified it as Maintenance & Repair Services. They further contended that the agreement between M/s Hindustan Aeronautics Limited, and Defence Establishments of Government of India was to undertake up-gradation of Defence Aircrafts and to supply upgraded aircraft and that the up-gradation involved addition of new features to the existing Aircrafts. They further submitted that the meaning of word 'upgrade' as provided in English Oxford Dictionary is "to raise to a higher standard or rank" and contended that the meaning does not equate to Maintenance & Repair.
The Bench observed -
++ Original Authority has stated that the contract numbers mentioned in refund claim were different from the ones mentioned on the invoices submitted alongwith refund claim. It was his responsibility to seek the correct invoices from M/s Hindustan Aeronautics Limited, and examine the issue based on contracts and connected invoices.
++ It was the responsibility of the Original Authority to give finding on the basis of contracts and invoices whether the activity was Maintenance & Repair Services or not before rejecting the refund claim.
++ The Original Authority has failed in his duty of adjudication that is to seek appropriate evidence, examine the evidence and to arrive at correct finding.
++ It is unfortunate that Commissioner (Appeals) did not remand the matter back to Original Authority to arrive at correct finding by examining evidence.
++ We are satisfied that in respect of the up-gradation activity undertaken by M/s Hindustan Aeronautics Limited, the same did not amount to providing of service for Maintenance & Repair Services. Therefore, the amount deposited by M/s Hindustan Aeronautics Limited, in respect of which they sought refund was not due to exchequer as Service Tax. Therefore, we direct the Original Authority to refund the amount deposited as Service Tax on account of Maintenance & Repair Services in respect of the activity by M/s Hindustan Aeronautics Limited for up-gradation of aircrafts which were undertaken by them on behalf of Establishments of Defence of Government of India through said four contracts.
The appeal was allowed and the original authority was directed to grant the refund within sixty days.
(See 2017-TIOL-29-CESTAT-ALL)
