Service tax on installation activity upheld, while quantification of the taxable service element was remanded for fresh scrutiny of records.

Installation of solar water heater systems was treated as a distinct service falling within Erection, Installation and Commissioning Service, and the absence of a separately shown installation charge did not take it outside the service tax net. The taxable service element was therefore upheld as chargeable. However, the quantification of the service component required fresh examination because the assessee had produced cost and sales data that had not been properly scrutinised. The matter was remanded for reconsideration of the records before the demand could be finalised.

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Issues: (i) Whether the activity of installing solar water heater systems, when no separate installation charges were raised, was classifiable as Erection, Installation and Commissioning Service and liable to service tax; (ii) whether the computation of the service component required reconsideration on the basis of the data furnished by the assessee.

Issue (i): Whether the activity of installing solar water heater systems, when no separate installation charges were raised, was classifiable as Erection, Installation and Commissioning Service and liable to service tax.

Analysis: The assessee manufactured solar water heater systems and supplied them through dealers, who in turn effected sales to customers and charged amounts for installation. Even though installation charges were not separately recovered by the assessee, the activity of installation was found to be distinct and to fall within the service category of erection, installation and commissioning. The absence of a separately shown charge did not take the activity outside the service tax net.

Conclusion: The installation activity was held taxable under Erection, Installation and Commissioning Service, in favour of Revenue.

Issue (ii): Whether the computation of the service component required reconsideration on the basis of the data furnished by the assessee.

Analysis: The assessee had produced cost and sales data for determining the service component, and that material had not been examined by the adjudicating authority. Since the quantification of the taxable service element depended on scrutiny of those records, further examination was necessary before finalising the demand.

Conclusion: The matter on quantification was remanded for fresh consideration of the records and documents, in favour of the assessee on that limited aspect.

Final Conclusion: The service element in the installation activity was upheld as taxable, but the demand was not finally quantified and was sent back for reconsideration of the service component on the basis of the records.

Ratio Decidendi: A composite supply involving installation of goods may attract service tax as erection, installation and commissioning service even without a separately billed installation charge, but the taxable value must be determined on a proper examination of the underlying records.

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