The New Delhi bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) allowed the appeal and held that in the period involved in the appeal no service tax was charged on composite contracts.
In this case, the appellant M/s BEML Ltd has approached CESTAT requesting to quash the order passed by the Commissioner of CGST dated 30.07.2018.
The appellant, M/s BEML Ltd is a public sector undertaking under the control of the Ministry of Defence, that provides maintenance and repair services for Heavy Earth Moving Machinery. This includes supplying spare parts and consumables with respect to heavy machinery. For the above-mentioned purpose, the appellant entered into Maintenance and Repair Contracts appellant with customers who bought heavy machinery from the manufacturing divisions of the appellant.
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The appellant has entered into a composite contract for the supply of spare parts and consumables as well as repair and maintenance services, in the agreement dated 30.12.2009 with M/s. Northern Coalfields Ltd.
After the audit was carried out by the Central Excise Department, a show cause notice dated 14.10.2014 was issued to the appellant proposing a service tax demand of Rs. 4,78,75,288/- by invoking the extended period of limitation.
The service tax demand of Rs. 4,78,75,288 with interest and penalty has been confirmed holding that the appellant has been using its contracts with its customers to avoid e the service tax liability by attributing a disproportionate amount to the cost of spare parts and consumables.
The CESTAT bench comprising of Mr. Justice Dilip Gupta and Ms. Hemambika R. Priya, Member (Technical), observed that on composite contracts, service tax was not levied up to 01.07.2012 and the period involved in this appeal is from April 2009 to June 2012.
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Due to the above reason, the bench held that the impugned order passed by the commissioner cannot be sustained.
The CESTAT bench allowed the appeal.
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