Full Judgment
2. The appellants contention was that this activity does not come within the ambit of definition under Section 65 (64) of Finance Act under the category of maintenance or repair service up to 16.6.05 only.
They were not having any maintenance contract. It was only u work order. Therefore, they were not covered in the relevant category for payment of Service Tax. Learned Counsel submits that an identical issue was decided by this bench in Final Order No. 172/2007 dated 31.1.2007 wherein it was clearly held that service tax is not leviable in cases where there is no contract prior to 16.6.05.
We have gone through the records of the case carefully. The appellants carry out repair/maintenance of ships. However it is not disputed that they do not have any maintenance contract with their customers. In these circumstances, the Government's circular referred to supra by the learned advocate is clearly applicable. In other words, in the absence of a maintenance contract prior to 16.6.2005, the appellants are not liable to pay Service Tax. The Director General of Service Tax has given some clarification, the Adjudicating authority has relied on the same without putting the appellants to notice. This is bad in law. Moreover, the clarification of the Director General is contrary to the instructions of the government. The entire period of dispute is prior to 16.6.2005. After the amendment on 16.6.2005, the appellants is paying Service Tax. It has been clarified by the Government that even if maintenance is carried out under any contract apart from other services, the appellant is not liable to pay Service Tax prior to 16.6.2005. In order to levy Service Tax prior to 16.6.2005, a pure maintenance contract is a must. In the present case, there is no evidence that the appellant had entered into a maintenance contract with their customers. There is substance in appellant's contention that the nature of the services rendered by them amounts to work order. The adjudicating authority himself has stated the argument of the party prima facie is justifiable. After stating his view, he has committed volte face by relying on Director General of Service Tax's clarification. The appellants are not liable to pay Service Tax for the period prior to 16.6.2005. In the absence of a maintenance contract with their customers. In any case, no penalty is leviable on the appellants in the circumstances of the case. In the result, we set aside the impugned order and allow the appeal with consequential relief 4. We have considered the submissions of both sides and find that the ratio of Cochin Shipyards Ltd., cited supra by the counsel clearly applies to the facts of the case. The appellants were not working under any contract. Hence, the cited judgment applies to this case. Following the ratio of the above noted judgment, the impugned order is set aside and appeal allowed with consequential relief if any.