WARTSILA INDIA LIMITED Vs. COMMISSIONER OF C. EX.

JUDGEMENT

(1.) IN this application, the Appellant seeks waiver of pre -deposit and stay of recovery in respect of service tax amounting to over Rs. 2.31 crores and penalties. The demand is for the period 16 -6 -05 to 30 -4 -06 and under the head "Maintenance or Repair services". The Appellant, under an agreement (Operation and Maintenance agreement) with M/s. Mukand Limited, was operating a Power Plant owned by the latter and supplying electricity to them against payment of a fee during the period of dispute. The fee, called O & M fee, was Rs. 7.5 lakhs per month which consisted of operation fee (about 80%) and maintenance fee (about 20%), which were separately collected from M/s. Mukand Limited under separate invoices issued from month to month. The Appellant paid service tax under the aforesaid head on the maintenance fee and did not pay the tax on operation fee. (They are paying service tax on operation fee also after the period of dispute). In a show -cause notice issued on 28 -8 -2007, the department demanded service tax on operation fee component of the O&M fee collected by the Appellant from M/s. Mukand Limited. It also raised similar demand in respect of fees collected by them from other customers during the aforesaid period. The demand was contested. The adjudicating authority, however, held that the service rendered by the Appellant to the customers was in the nature of management of immovable property coming within the ambit of "Management, Maintenance or Repair services" falling under Section 65(64) of the Finance Act, 1994 and that the operation fee collected by the Appellant from their customers (power plant owners) was a fee collected for management of the power plant as immovable property. In this view, the demand of service tax raised in the show -cause notice was confirmed against the Appellant and penalties were imposed on them.

(2.) THE ld. counsel for the Appellant has claimed a strong case in view of the decision in the case of CMS (I) Operations and Maintenance Co. P. Ltd. v. CCE, Pondicherry : 2007 (7) S.T.R. 369 . It is submitted that the view taken in the said case is equally applicable to the facts of the present case. It is also pointed out that, in several subsequent similar cases, the above view was followed by various benches of this tribunal for granting waiver and stay in favour of other Assessees. In this connection, the counsel has referred to case law - Operational Energy Group India Pvt. ltd. v. Commr. of S.T., Chennai, 2008 (12) S.T.R. 47 Covanta Samalpatti Operating Pvt. Ltd. v. Commr. of ST., Chennai : 2009 (14) S.T.R. 383 j etc. The ld. counsel has also submitted that the adjudicating authority did not consider the above case law cited by the Appellant. He has also raised the plea of limitation against the demand of service tax.

(3.) AFTER considering the submissions, we have found prima facie case for the Appellant in view of the tribunal's decision in CMS (I) Operations & Maintenance Co. P. Ltd.'s case (supra) wherein the "pith and substance rule" was invoked to hold that the main function of the Assessee was to operate the power plant and that maintenance/repair was only incidental thereto and further that such maintenance and repair of the power plant was not a service rendered to another person. The ratio of the decision in CMS (I) Operations & Maintenance Co. P. Ltd.'s case was followed by different benches of the tribunal in cases involving facts similar to the facts of the present case. For instance, in the case of Operational Energy Group India Pvt. Ltd. (supra), waiver of pre -deposit and stay of recovery were granted after holding that the operation of power plant could not come under the definition of "management of immovable property". A view to the same effect was taken in the case of Covanta Samalpatti Operating P. Ltd. also. On a perusal of the facts of the said cases, we have noted striking resemblance with the facts of the instant case and, therefore, we are inclined to follow the above precedent. The arguments made before us revolve around the term "management" appearing in the definition "maintenance or repair" under Section 65(64) of the Act. The Commissioner has brought operation of power plant within the scope of "management of immovable property". As per the said definition, maintenance or repair means any service provided by any person under a contract or an agreement in relation to maintenance or management of immovable property, The ld. JCDR has argued that power plant is an immovable property and its operation is part of its management. The ld. counsel has opposed this argument on the strength of the aforesaid case law. This matter, in our view, is debatable, for which both sides will have to wait for final hearing of the appeal. For the present, for the sake of consistency, we follow the case law cited by the ld. counsel and grant waiver of pre -deposit and stay of recovery in respect of service tax (with interest) and penalty amounts.