By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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Whether activity of repair/testing of transformers and replacement of coil, transformer oil and supply of other items could get benefit of Notification No.12/2003 prescribing deduction of value of material in valuation of service tax liability under Management, Maintenance or Repair service? Held yes.
Facts:
Respondent provided service of repair of old and damaged transformers under composite agreement with the customers and discharged service tax liability on the labour component under Management, Maintenance or Repair service and not on the value of various items replaced but the department challenged the orders contesting that the Respondent provided service of repair or maintenance of transformers under composite contract and was obliged to replace certain parts which were used/ consumed during the repair and that process of replacement was only ancillary to main work of repairs. Moreover, exemption claimed as per Notification 12/2003 was not applicable as replaced parts were not sold by them.
Held:
The Tribunal held that, the total repair cost constitutes cost of labour charges and cost of goods LV leg coil, transformer coil and other supply items. Value for parts were shown separately in the contract and thereby condition of documentary evidence indicating value of goods/ material as per the Notification No.12/2003 was fulfilled. VAT was paid on goods/materials value. Therefore, Revenue’s contention was rejected.
