2020 (1) TMI 942 - AT - Service Tax

Tribunal grants exemption for fabrication of armored vehicles

The Tribunal ruled in favor of the appellant, setting aside the demands and penalties. The appellant was granted exemption under Notification No.6/2006-CE ... Classification of special purpose light armoured vehicles under tariff heading 8705 90 00 - Exemption under Notification No.6/2006-CE dated 1.3.2006 for special purpose vehicles - Distinction between works contract service and business auxiliary service where services are supplied together with materials - Taxability of renting of immovable property service on receipt basisClassification of special purpose light armoured vehicles under tariff heading 8705 90 00 - Exemption under Notification No.6/2006-CE dated 1.3.2006 for special purpose vehicles - Appellant's fabricated bullet proof/light armoured vehicles are classifiable as special purpose vehicles under tariff heading 8705 90 00 and are entitled to exemption under Notification No.6/2006-CE dated 1.3.2006. - HELD THAT: - The Tribunal examined the vehicle features - protection against AK 47, splinter protection, bullet proof glass, and firing apertures - and accepted that the vehicles are designed primarily for protection and policing use rather than for conventional passenger or goods transport. Reliance was placed on the Tribunal's earlier decision in JCBL Limited, which treated similar vehicles as special purpose armoured vehicles. The HSN Explanatory Notes indicate that heading 87.10 excludes armoured vehicles of the type manufactured here and that heading 8705 covers vehicles whose primary purpose is not transport of persons or goods. Applying these principles, the vehicles merit classification under chapter heading 8705 90 00 and hence attract the exemption under the stated notification; duty demand on this ground therefore does not sustain. [Paras 10]Classification under 8705 90 00 accepted; exemption under Notification No.6/2006-CE dt.1.3.2006 allowed and duty demand set aside.Distinction between works contract service and business auxiliary service - Services supplied together with material classified as works contract service - The activity of bullet proofing undertaken by the appellant, performed together with supply of materials (on which VAT was paid), is correctly classifiable as works contract service and not as business auxiliary service. - HELD THAT: - On the factual finding that the appellant supplied material as part of the bullet proofing activity, the Tribunal applied the principle in Larsen & Toubro Ltd., that where services are supplied along with materials, the composite activity merits classification as works contract service. Accordingly, the demand framed under the head of business auxiliary service is not sustainable and is set aside. [Paras 11]Bullet proofing activity held to be works contract service; demand under business auxiliary service set aside.Taxability of renting of immovable property service on receipt basis - Taxable event for renting service during the relevant period was receipt of remuneration - No service tax is payable by the appellant on renting of immovable property service for the impugned period because no remuneration was received during that period. - HELD THAT: - The Tribunal noted that, for the relevant months (March to August 2008), service tax on renting of immovable property was leviable on the basis of receipt. The record shows that the appellant did not receive any amount for such renting; therefore, there was no taxable event and no service tax liability. Consequently, connected quantification and penalty aspects were also unsustainable. [Paras 12]No service tax liability on renting of immovable property service; related demand and penalties set aside.Final Conclusion: The appeal is allowed: classification of the vehicles under 8705 90 00 and entitlement to exemption under Notification No.6/2006-CE dt.1.3.2006 is upheld; bullet proofing activity is held to be works contract service (not business auxiliary service); no service tax is due on renting of immovable property for the period in question; the entire demand and penalties are set aside. Issues Involved:1. Classification of fabrication of armored vehicles2. Demand of service tax under Business Auxiliary Service or works contract service3. Demand of service tax on renting of immovable property serviceDetailed Analysis:Issue 1: Classification of Fabrication of Armored VehiclesThe appellant was engaged in manufacturing bulletproof vehicles and claimed exemption under Notification No.6/2006-CE. The vehicles were designed for protection against AK-47, splinter proof protection, and bulletproof glass, primarily for police use. The appellant undertook bulletproofing activities on cars, treating it as works contract and paying VAT. The Revenue contended that the vehicles should be classified under Chapter heading 8710, denying the exemption. The Tribunal analyzed the features of the vehicles and held that they merit classification under Chapter heading 8705 90 00 as special purpose light armored vehicles, entitling the appellant to the exemption.Issue 2: Demand of Service TaxRegarding the demand of service tax, the appellant argued that the bulletproofing activity should be classified under works contract service, not Business Auxiliary Service, citing the decision of Larsen & Toubro Limited. The Tribunal agreed, stating that when services are provided along with materials, they merit classification under works contract service. Consequently, the demand under Business Auxiliary Service was set aside.Issue 3: Demand of Service Tax on Renting of Immovable Property ServiceThe appellant was alleged to owe service tax on renting of immovable property service, but as per records, no remuneration was received during the relevant period. The Tribunal noted that service tax was payable on a receipt basis during that time, and since no remuneration was received, the appellant was not liable to pay service tax on renting of immovable property service. Therefore, the demand was deemed unsustainable, and no penalty was imposed on the appellant.In conclusion, the Tribunal ruled in favor of the appellant on all issues, setting aside the demands and penalties. The appellant was found entitled to exemption under Notification No.6/2006-CE for the fabrication of armored vehicles, and the classification of bulletproofing activity under works contract service was upheld. The demand for service tax on renting of immovable property service was also dismissed due to the lack of remuneration received by the appellant.