The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that services should be provided to the Government, even by way of repair, maintenance, or alteration of, inter alia, any other original works, and such service should not be consumed in a commerce, industry or any other business or profession are not liable to Service Tax.
Bharat Electronics Limited, the appellant assessee received service charges from Heavy Vehicle Factory (HVF), Avadi for overhauling parts of the gun control stabilizer under Repair and Maintenance service.
The assessee appealed against the order passed by the Commissioner (Appeals) for confirming the demand for Service tax on the amounts received towards Repair and Maintenance service and on the amounts received towards liquidated damages and appropriate interest under Section 75 of the Finance Act, 1994.
Raghavan Ramabadran, the counsel for the assessee contended that the service rendered by the assessee were exempted since they are only rendering services to the Ministry of Defence, Government of India, and that they are also exempted by exemption Notification.
Harendra Singh Pal, the counsel for the department relied on the decisions made by the lower authorities and contended that the assessee would perform a substantial service as reflected in the contract and hence, it has not ascertained the proper nature of the contract to discharge the applicable taxes and consequently, they had not paid the applicable Service Tax.
The Bench observed that according to exemption Notification No. 25/2012-Service Tax and Section 102 which was inserted with effect from 14.05.2016 vide the Finance Act, 2016 granting special retrospective exemption from payment of Service Tax to taxable services provided to the Government of India.
The two-member bench comprising P. Dinesha (Judicial) and Ajit Kumar (Technical) the services provided to the government by way of repair and maintenance service were not liable to service tax.
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