By Puloma Dalal, Jayesh Gogri, Chartered Accountants
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The respondent paid service tax for maintenance services – deducted value of spare parts under Notification No.12/2003-ST – Revenue contended, exemption not available for the value of spare parts – Commissioner (A) set-aside the order taking a view that the said service related to immovable property and during the period 01/07/2003 to 09/09/2004, the activity was not liable – Held, no merit in the appeal filed by the revenue as no evidence was adduced to support the view that turbine is a movable property and benefit of Notification No.12/2003 also available.
Facts:
The respondent was engaged in providing maintenance and repair services under the contract for the maintenance of the Gas Turbines and related ancillaries which form integral part of the power plant. The respondent paid service tax in respect of the maintenance fees after deducting the value of spare parts supplied by them under Notification No.12/2003-ST. Revenue took a view that respondent was not eligible for exemption under the said notification. The respondent also argued that gas turbines are huge and embedded to earth and thus an immovable property. The respondent relied on the decision of the Apex Court in the case of TTG Industries Ltd. (Madras) Manu/ SC/0459/2004, where the Apex Court observed that mudguns and drilling machines cannot be shifted from one place to another and assembled or erected and are to be operated from that place till they are worn out or discarded, and thus had held that mudguns and drilling machines erected at sites on specially made platform are immovable property.
Held:
The decisions cited by the respondent and the photographs submitted, made it clear that turbines are nothing but immovable property. The Revenue’s stand was merely based on the ground that the assessee himself has used the word ‘equipment’. However, substance of the contract indicated that turbine formed part of immovable property. Since the Revenue was not able to produce any evidence to support the view that turbine is movable property, the Commissioner (Appeals)’s decision was found correct and as such, during the period from 01/07/2003 till 09/09/2004, the service was not taxable. As regards the eligibility of deduction of value of goods, it was observed that the very fact of existence of transaction value at the time of import and issue of invoice by a local party to the recipient of service, would go to show that there was a sale of spare parts in the course of international deal and therefore, no VAT was chargeable. Just because the contract provided that replacement of parts was free of charge would not mean there was no sale. The value of spare parts formed a part of contract for maintenance and repair and therefore exemption under the Notification No.12/2003-ST was available and thus Revenue’s appeal was rejected.
