PLA TYRE WORKS Vs. CCE (ST)

JUDGEMENT

(1.) THE tower authorities have demanded differential service tax of Rs. 3,66,046/ - along with education cess from the appellants and have imposed on them a penalty of Rs. 1,000/ -. After examining the records and hearing both sides, I note that the appellants were rendering repairs and maintenance service to the customers of M/s. MRF Ltd. on behalf of the said company qua franchisees during the period of dispute [16.6.2005 to 31.3.2006]. They paid service tax on 30% of the gross value mentioned in the relevant invoices. This amount, on which tax was paid, was attributable to the repairs and maintenance service, while the rest of the gross amount (70%) was the material cost incurred by the appellants in rendering the said service. Repairs and maintenance service became taxable with effect from 16.6.2005. Even prior to that date, service provider was entitled to deduct from the value of taxable service the cost of the materials, if any, sold to the customer during the course of providing maintenance or repair service vide Clause vi of the exclusion part of Explanation - 1 to Section 67 of the Finance Act, 1994. In the instant case, the cost of materials, which were supplied by M/s. MRF Ltd. (franchiser), was not included in the value of the above service by the assessee. Exemption Notification No. 12/2003 -ST dated 20.6.2003 (as amended) was also in force during the period of dispute. This Notification allowed deduction of the value of goods and materials sold by the service provider to the service recipient, from the value of taxable service, subject, inter alia, to the condition that no credit of duty paid on such goods/materials had been taken by the service provider under the provisions of CENVAT Credit Rules. The appellants had not taken any such credit and, prima facie, they were eligible for the benefit of the above Notification. In addition to these, learned Counsel has also relied on Stay Order Nos. 2 - 5/2007 dated 2.1.2007 passed in the case of K.R. Shanthi v. CCE, Salem 2007 (6) STR 331 (Tri. Chennai), wherein raw material cost was prima facie held to be not includible in the value of taxable service in view of the Tribunal's decision in Adlabs v. Commissioner 2006 (2) STR 121 (Tribunal). I have heard learned SDR also, who has reiterated the findings recorded by the lower appellate authority.

(2.) HAVING found prima facie case for the appellants, I grant waiver of predeposit and stay of recovery in respect of the amounts of tax and penalty. Issue this order by 'dasti', in view of the latest demand notice issued by the Superintendent of Central Excise, dated 8.8.2007. (Dictated and pronounced in open Court)