By TIOL News Service

MUMBAI, MAY 05, 2016: THIS is a Revenue appeal against the order passed by the Commissioner (A).

The respondents had entered into an 'Operation & Maintenance Agreement (O&M Agreement)" with M/s. HPL Co-generation Ltd. (HPLCL) on 30.07.2006 at Kolkata for providing operation and maintenance service for their power plant at Haldia in West Bengal.

In respect of the payments received under the aforesaid contract for the period from October 2006 to June 2007, the respondent deposited a sum of Rs. 24,09,838/- as service tax by classifying their service as "Consulting Engineer Services" and also filed service tax returns accordingly with the department.

On realizing that the services relating to the operation and maintenance of the power plant were not liable to service tax they discontinued the payment of service tax w.e.f July 2007 and intimated the department on 08.10.2007.

They also filed ST-3 claiming thereunder refund of Rs.24,09,838/- paid by them as service tax during the period referred. A refund claim in Form-R was also filed on 04.12.2007.

The Adjudicating authority rejected the refund claim on the ground that the classification of the services by the respondent assessee was erroneous and the correct classification was "Management, Maintenance and Repair Services".

The Commissioner (A) set aside this order and directed the lower authorities to sanction the refund.

For this reason, the Revenue is before the CESTAT.

The AR supported the order of the adjudicating authority.

The respondent submitted that the lower appellate authority had correctly relied on the decision in CMS (India) Operations & Maintenance Company vs. CCE - 2007-TIOL-892-CESTAT-MAD which involved identical set of facts. Furthermore, the Adjudicating Authority could not have reclassified the services rendered by them in a refund claim filed by the respondent assessee& if the revenue wanted to reclassify the services rendered they should have done so by issuing a separate show-cause notice.

The CESTAT extracted at length the findings recorded by the Commissioner (Appeals) & thereafter observed -

++ Grounds of appeal as taken by the revenue in the appeal memorandum are nowhere contradicting the factual position as stated by the First Appellate Authority. It is also to be noted that the First Appellate Authority has correctly come to a conclusion that similar issue has been decided by the Tribunal in the case of CMS (India) Operations & Maintenance Company (supra). Further, we also note that identical view has been taken by this bench in the case of CST vs. Polydrill Engineers P. Ltd. in Order No. A/86518/16/STB - 2016-TIOL-927-CESTAT-MUM.

++ The reclassification of the services as sought by the Adjudicating Authority in a refund claim filed by the assessee seems to be incorrect appreciation of the law. In our view if the Revenue authorities were holding a view that the services rendered by the respondent assessee would be correctly classified under "Management Maintenance and Repair Services" they should have issued a show-cause notice for doing it so. Revenue authorities cannot reclassify the services rendered by the respondent assessee in a refund claim filed by the respondent.

Holding that the impugned order is correct, legal and does not suffer from any infirmity, the Revenue appeal was rejected.

(See 2016-TIOL-1073-CESTAT-MUM)