Classification of Service Provided by Larsen & Toubro Ltd: CESTAT Upholds 'Business Auxiliary Service' Over 'Repair and Maintenance' [Read Order]

The Bangalore Bench of Customs,Excise and Service Tax Appellate Tribunal(CESTAT)upheld the classification of service provided by Larsen & Toubro Ltd. as 'Business Auxiliary Service' over 'Repair and Maintenance Service’.

Larsen & Toubro Limited,appellant-assessee,had entered into a marketing agreement with L&T Komatsu Ltd. on 01.02.1998 to act as its agent for promoting and selling products in specified areas. Authorities later treated this activity as ‘Repair and Maintenance Service’ and raised a demand of ₹59,43,842 based on payments received in March 2005. A show-cause notice was issued on 22.04.2010, and the demand was confirmed through the impugned order.

Tax Planning For NRIs Click here

When the appeal was heard, the assessee’s counsel argued that the issue had already been settled in the appellant’s own case by a Larger Bench, which had held that the activity fell under ‘Business Auxiliary Service’ (BAS). He noted that service tax was already being paid under BAS from April 2005 onwards.

He referred to the same agreement dated 01.02.1998, which was earlier examined by the Tribunal. At that time, the department had tried to classify the activity under ‘Clearing and Forwarding Agency Service’, but the Tribunal had rejected that and dropped the demand.

The counsel argued that the current demand, raised under ‘Repair and Maintenance Service’ for a period before 09.07.2004, was not valid, especially since there had never been such classification earlier and the department had accepted BAS from April 2005. He also pointed out that there was no earlier demand under ‘Repair and Maintenance Service’ before March 2005.

Tax Planning For Trusts and cooperation Societies Click here

He cited a 2016 tribunal ruling which reviewed the same agreement and concluded that the appellant acted as a marketing agent and not as a clearing and forwarding agent, confirming classification under BAS.

Read More: CESTAT Denies CENVAT Credit on Rent-a-Cab Services, Due to Non-Compliance with Rule 2(l)

He further contended that the demand was time-barred, as the department already had knowledge of the agreement and had earlier initiated proceedings on the same facts. Hence, invoking the extended period was not justified. He supported this with Supreme Court rulings in Anand Nishikawa Co. Ltd. and Bell Granito Ceramica Ltd.

The departmental representative, however, supported the order and maintained that the activity rightly fell under ‘Repair and Maintenance Service’.

Want a deeper insight into the Income Tax Bill, 2025? Click here

The two member bench comprising P.A.Augustian (Judicial Member) and R.Bhagya Devi(Technical Member) considered submissions from both sides and went through the records. It found that the matter had already been decided in the assessee’s earlier case, where the Larger Bench held that the activity was classifiable under ‘Business Auxiliary Service’. The department had also accepted this and started collecting tax under that category from 10.09.2004. Given this, the tribunal held that the demand raised under ‘Repair and Maintenance Service’ could not be sustained.

In short,the order was set aside.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates