Wipro Ge Medical Systems Pvt. Ltd v. The Commissioner Of Service Tax

S.L. Peeran, Member (J)

1. The appellants are required to pre-deposit service tax amount of Rs. 3,03,77,607/- and penalty of Rs. 4,00,00,000/- under Section 78 of the Finance Act and Rs. 200/- per day under Section 76 and Rs. 1000/- under Section 77 of the Act. They have paid an amount of Rs. 54,18,230/- towards the Service Tax and an amount of Rs. 5,41,365/- towards the interest. This is second round of litigation. The appellants claimed 70% deduction in respect of spares and parts in terms of Annual Maintenance Contracts (AMC). The Tribunal remanded the matter to examine the invoices produced by the appellants with regard to the cost of spares and parts. The Commissioner in Para 5 of the impugned order has noted that the assessee arbitrarily deducted 70% in contravention of provisions of Section 67 of the Finance Act. He has given findings that such quantification is erroneous and legally not sustainable. He rejected the certificate furnished by Shri M.N.S. Nagarajan, Chartered Accountant with regard to the value of the parts and spares. He has noted that without such verification, the claim to the extent of Rs. 21.61 lakhs cannot be considered and rejected the pleas and confirmed the demands.

2. The Larned Counsel submits that there is a clear violation of remand directions. He submits that they had produced evidence before the Commissioner and the Commissioner should have quantified or should have got the invoices verified with regard to the sales price which have not been done. He cannot summarily reject the invoices on the findings that the deduction of 70% of invoices value suffered from legal infirmity. He submits that the assessee is eligible to claim the cost of spares and parts in terms of Notification No. 12/2003-Service Tax, dated 20.6.2003. He relies on the following judgments:

(i) Shilpa Color Lab v. CCE, Calicut 2007 (95) STR 423 (Tri. - Bang.)

(ii) Modi Corporation Ltd. v. State of Karnataka 2005 (ST3) GLX-0143 (S.C.)

(iii) Modi Xerox Ltd. v. State of Karnataka 1999 (ST2) GLX-0035-Kar

(iv) Kone Elevators India Ltd. v. CST, Chennai 2007-TIOL-921-CESTAT-MAD

The Larned Counsel submits that the above noted judgments clearly laid down that when the assesseee has paid the service tax on the parts and spares then its value is deductible from the service contract. It was the submission of the appellants that they have paid the service tax on the commission received by them in respect of the AMC contracts. He submits that the confirmation of demand is totally unjustified in the light of the Notification and the judgments cited supra.

3. The learned SDR seriously opposed the prayers and submits that the burden to discharge the liability lies on the assessee as they are seeking the benefit of Notification. She submits that mere production of invoices is not sufficient but they have to submit sale / purchase value of spares and parts which has not been done. Therefore the findings recorded by the Commissioner in Paragraph 5 of the impugned order is sustainable. She submits that as they are not pleading any financial hardship, they should pre-deposit the entire amounts in the matter. She further submits that the judgments referred to by the appellants are distinguished and the same is not applicable to the facts of the present case. She further submits that as noted by the Commissioner in Paragraph 5 of the impugned order, they have only taken approximate estimate of the value of the spares and parts as 70% without substantiating their claim by producing invoices for the purchase of spares and parts. She took us through the charts to substantiate the pleas and submits that the actual cost of material has not been submitted by the assessee.

4. The Larned Counsel in reply submits that all details had been furnished before the Commissioner but he has not examined the evidence on records.

5. We have carefully considered the submissions made by both the sides. This is second round of litigation. The Commissioner was given specific directions to examine the entire invoices and records. The invoices and Chartered Accountants certificate have been produced by the appellants before us. The Chartered Accountants certificate cannot be arbitrarily rejected as held in large number of judgments. The Commissioner ought to have examined the entire records for verification of their claim. In terms of the Notification and the judgments cited supra, the spares and parts are not required to be taken into consideration while arriving at the service tax liability. The appellants have paid service tax on the commission received by them in terms of AMC contracts. Prima facie, the impugned order is not sustainable. The appellants are entitled to seek waiver of pre-deposit of entire amount of duty and penalty. The stay application is allowed by granting waiver of pre-deposit of the balance disputed amount and staying its recovery till the disposal of the appeal. As revenue involved in the matter is high, the appeal is listed for final hearing on 05th June 2008.

(Pronounced and dictated in the open court)