At, Customs Excise Service Tax Appellate Tribunal Principal Bench New Delhi
By, THE HONOURABLE MR. S.K. MOHANTY
By, JUDICIAL MEMBER & THE HON?BLE MR. B. RAVICHANDRAN
By, TECHNICAL MEMBER
For the Appellant: B.L. Narsimhan, Narender Singhvi, Advocates. For the Respondent: Amresh Jain, AR.
1. Appellant is aggrieved by the order dated 04/10/2012 of Commissioner of Central Excise, Panchkula. The appellant is a association/ club of various companies with some common purpose. They were engaged in providing aircrafts to the members for use, for which they received consideration. They were registered with the department and paid Service Tax under the category of supply of tangible goods w.e.f. 16/05/2008. The Revenue entertained the view that the appellants are liable to pay Service Tax under category of Club or association Service for the period 01/04/2006 to 16/05/2008. Another dispute is with reference to Service Tax liability of the appellant under the category of repair and maintenance service for the period 2006 to 2011. In pursuance of an agreement with M/s Honeywell, France the appellants got the engines of the aircraft repaired, whenever required. For this they have paid consideration to the foreign company. The said consideration was sought to be taxed under reverse charge basis against the appellant.
2. The proceedings initiated against the appellant resulted in the impugned order which confirmed Service Tax liability of 4.96 Cr. under Club or Association Services and Rs. 28,74,752/- under repair and maintenance service. Penalties were also imposed on the appellant.
3. The Ld. Counsel appearing for the appellant submitted that they have no liability to pay Service Tax under Club or Association Services. There is no service provider/ service recipient relationship between the appellant and the members who availed the service of aircrafts provided by the appellant. He relied on the decision of Hon’ble Gujarat High Court in the case of Sports Club of Gujarat Ltd. 2013 (31) STR 645 (Guj.) and decision of Tribunal in FICCI, 2015 (38) STR 529 (Tri-Del).
4. Regarding tax liability under repair & maintenance service, it is submitted that the aircraft engine is taken to France and the repair is carried out by the M/s Honeywell, outside India. M/s Honeywell engaged another person M/s Airworks, in India to remove the engine and to send it for repair and to refit the engine after repair. M/s Airwork were registered with the Department and were discharging Service Tax. M/s Honeywell did not render any repair service in India and as such the appellants are not liable to pay Service Tax on the whole of service is rendered outside India.
5. The Ld. Counsel contested the demand on limitation also. He submitted that Service Tax liability, if any, to be discharged on repair and maintenance service is fully cenvatable for them and in such situation there could be no malafidee or misrepresentation in order not to discharge the Service Tax. Accordingly, he prayed against the demand for extended period as well as for imposition of penalties.
6. The Ld. AR reiterated the findings of the Original Authority. Regarding the repair and maintenance service he submitted that the appellant have entered into an agreement with M/s Honeywell, France. The appellants have no role or agreement with M/s Airworks India. M/s Honeywell in order to repair the aircraft engine, have to undertake the work of removing the engine, transporting, repairing and sending it back to India for refitting. All these activities constitute repair and maintenance. Since part of the services is rendered in India, The Service Tax liability shall arise in terms of Rule 3 (ii) proviso of Import of Service Rules, 2006.
7. We have heard both sides and perused the appeal records. On the first point we note that the issue is no more res-integra as there are no services provider-service recipient relationship between the club and the members as held in various juridical pronouncements. The case laws relied upon by the appellant, cited above squarely applies to the facts of the present case. As such we hold that there could be no liability of Service Tax on the appellant under the category of Club or Association Service. It is also to be noted that the appellants were registered and have been paying Service Tax under the category of supply of tangible goods after the introduction of such tax entry w.e.f. 16/05/2008.
8. Regarding the appellant’s tax liability under Repair and Maintenance Service, we note that the repair of aircraft engine will encompass removal of same from the aircraft, transportation to France, repair there, bringing it back to India and fitting it into the aircraft. As such the repair activities involving series of such acts are necessarily done partly in India and partly outside India. The contention of the appellant that for the services rendered in India M/s Airworks have suffered Service Tax will not assist their case as they have paid full consideration for repair and maintenance for aircraft engine to M/s Honeywell, without any reference to the work carried out by M/s Airworks in India. In other words, the appellants received taxable service of repair and maintenance. The said service has been carried out and provided by M/s Honeywell partly in India and partly in France. M/s Honeywell used another sub-contractor on their own to render the part of repair service in India will bring the tax liability to the appellant in view of the proviso to Rule 3 (ii) of Taxation of Services Rules, 2006. Here we note that this reasoning is not adopted by the Original Authority. However, the Original Authority simply relied on the statutory provisions and held that the appellants are liable to service tax for repair and maintenance. Since, this is involving a legal issue of applicability of the statutory definition we hold that in line with the provision of Taxation of Service Rules, 2006 applicable to repair and maintenance service, the appellants shall be liable to Service Tax.
9. We note that the appellants contested the demand on limitation. Admittedly, Service Tax, if any, payable by the appellants on repair and maintenance service is fully available as a credit to them. They were registered with the department and were discharging th
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e Service Tax under the category of supply of tangible goods. The Repair and Maintenance Service is with reference to such tangible goods (aircraft). Accordingly, the ingredients for invoking extended period could not be sustained in the present demand. There could be no malafide or misrepresentation attributable in such circumstances of the case. Accordingly, while upholding the tax liability on merit we find that the said demand should be restricted to the normal period. On the same reasoning, the penalties imposed on the appellants are also not sustainable. The same are set aside. 10. In view of the above analysis the appeal is partly allowed as above.