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Issues: Whether service tax was leviable on erection, commissioning and installation of medical equipment where the value of such activity was included in the sale invoice and central excise duty had been paid on the invoice value.
Analysis: The appellants manufactured and sold medical equipment, and the record showed that the invoice value covered the equipment as well as optional services connected with erection, commissioning and installation. No separate consideration was shown to have been charged for such activities, and the evidence indicated that they were incidental to delivery of the goods. The nature of the transaction had to be determined from the substance of the contract and surrounding circumstances, and where the main object was transfer of goods, the transaction remained one of sale rather than a separate taxable service. Since the erection and installation charges were already embedded in the sale value on which central excise duty had been discharged, separate service tax demand on that same value was not justified.
Conclusion: Service tax was not leviable on the erection, commissioning and installation activities in the facts of the case, and the demand of tax and penalties was unsustainable.
Ratio Decidendi: Where erection, commissioning and installation are merely incidental to the sale of goods and their value is already included in the sale consideration on which excise duty is paid, a separate service tax levy on the same value is not sustainable.
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