LAXMI TYRES Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THIS is an appeal filed by the Revenue against the Order -in -Original No. 20/P -III/STC/COMMR/2011 -12, dated 31 -10 -2011 passed by the Commissioner of Central Excise, Pune -III Commissionerate. The facts relevant for consideration in this case are as follows. The Respondent M/s. Laxmi Tyres, Kasarwadi, Pune are engaged in retreading of tyres and had entered into a franchisee agreement with M/s. MRF. The process of retreading of tyres consisted of (i) carrying out inspection of worn out tyres supplied by their customers to check the suitability of retreading; ii) buffing of the tyres; iii) patching on the cuts if any; applying of solution/adhesives on the surface; iv) fixing the piece of the tread rubber and v) heating the tyre to ensure the bonding given to fix the tread rubber to the tyre. During the period 1 -7 -2003 to 31 -3 -2008, the appellant did not obtain any Service Tax registration and failed to pay Service Tax on the retreading activity undertaken by them. Accordingly a show cause notice dated 23 -10 -2008 was issued by the appellant demanding Service Tax of Rs. 81,02,735/ - on the gross amount charged by the appellant amounting to Rs. 7,55,27,999/ - by classifying the service under the taxable service category of "Management, maintenance or repair service". The said notice also proposed to recover interest on the Service Tax demanded and also proposed to impose penalties on the appellant under the provisions of the Finance Act, 1994. The said notice was adjudicated by the Commissioner of Central Excise, Pune -III who held as follows: -

(2.) THE Revenue is aggrieved of the said order and is before us. The grounds urged by the Revenue in their appeal memorandum are as follows: -

(3.) THE ld. Counsel for the Respondent, on the other hand, argues that the order of the ld. Commissioner is sustainable in law. He relies on the decision of this Tribunal in the case of Chakita Ranjini Udyam ( : 2009 (16) S.T.R. 172 (Tri. -Bang.)) wherein it was held that tyre retreading is a composite contract involving sale of materials and rendering of service and specified as works contract under the Karnataka VAT Act and therefore, VAT paid on portion of turnover is attributable to transfer of property and therefore, benefit of Notification No. would be admissible. He also relies on the decision of this Tribunal in the case of PLA Tyre Works ( : 2009 (14) S.T.R. 32 (Tri. -Chennai)) wherein benefit of Notification No. was allowed in a case where Service Tax was paid on tyre retreading on 30% of the gross amount treating the balance 70% as value of goods.