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Service Tax on Operation of Power Plant

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2017-VIL-500-CESTAT-CHE-ST

M/s SHAPOORJI PALLONJI INFRASTRUCTURE CAPITAL COMPANY LIMITED Vs COMMISSIONER OF SERVICE TAX, CHENNAI

Service Tax - The appellants engaged in operation of power plant - demand of service tax on services provided for maintenance and repair of power plant, on the Major Maintenance Reserve and on activities of operation of power plant to produce electricity - appellants had split the ‘Operation Fee’ received by them as ‘Operation Charges’ and ‘maintenance charges’ in the ratio 55% and 45% respectivelywhether the appellants are liable to pay service tax on the activities of maintenance and repair of power plant as well as operation charges and the MMR deposit

whether the appellants are liable to pay service tax on the activities of maintenance and repair of power plant as well as operation charges and the MMR deposit

HELD – for the purposes of the service tax law, deduction of cost of materials and consumables can be permitted only if there is a sale involved and there being no sale involved in the entire exercise, appellant has necessarily to discharge tax liability on the entire gross value of the maintenance or repair services on the full amount demarcated by them as maintenance or repair service, being 45% of the total amount paid to them

No infirmity in the confirmation of tax liability on this score in the various impugned orders.Further, when the appellants themselves have vivisected the contract by apportioning 45% towards maintenance charges and 55% as operation fee, the contention raised by them that it is a composite contract is only to be brushed aside - the demand of service tax on operation charges is not sustainable

The Major Maintenance Reserve can by no stretch of imagination be considered as a part of the maintenance or repair fees paid or payable to the appellants. Therefore, they cannot be considered as taxable value under this head - there cannot be any service tax liability on the said MMR account - the penalties imposed in the orders impugned are set aside - since the appellants did not disclose the entire gross value of taxable services in the ST-3 returns and the returns reflected the value only after deduction of cost of materials, the notice issued invoking extended period is right and proper – assessee appeal is partly allowed

Further, when the appellants themselves have vivisected the contract by apportioning 45% towards maintenance charges and 55% as operation fee, the contention raised by them that it is a composite contract is only to be brushed aside - the demand of service tax on operation charges is not sustainable - the Major Maintenance Reserve can by no stretch of imagination be considered as a part of the maintenance or repair fees paid or payable to the appellants.Therefore, they cannot be considered as taxable value under this head - there cannot be any service tax liability on the said MMR account - the penalties imposed in the orders impugned are set aside - since the appellants did not disclose the entire gross value of taxable services in the ST-3 returns and the returns reflected the value only after deduction of cost of materials, the notice issued invoking extended period is right and proper – assessee appeal is partly allowed

Therefore, they cannot be considered as taxable value under this head - there cannot be any service tax liability on the said MMR account - the penalties imposed in the orders impugned are set aside - since the appellants did not disclose the entire gross value of taxable services in the ST-3 returns and the returns reflected the value only after deduction of cost of materials, the notice issued invoking extended period is right and proper – assessee appeal is partly allowed

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