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Issues: (i) Whether the fabricated bullet-proof vehicles were classifiable as special purpose light armoured vehicles under chapter heading 8705 90 00 and entitled to exemption under Notification No. 6/2006-CE; (ii) whether the bullet-proofing activity, undertaken with material on which VAT was paid, was liable to service tax as Business Auxiliary Service or was correctly treated as Works Contract Service; and (iii) whether service tax was payable on renting of immovable property service for the relevant period when no consideration had been received.
Issue (i): Whether the fabricated bullet-proof vehicles were classifiable as special purpose light armoured vehicles under chapter heading 8705 90 00 and entitled to exemption under Notification No. 6/2006-CE.
Analysis: The vehicles were found to be specially fabricated for protection against bullets and grenades, with defensive features such as bullet-proof glass and firing apertures. Applying the classification principles recognised in the earlier decision relied on, vehicles primarily designed for policing and defence functions, and not for transport of persons or goods, fall under chapter heading 8705 rather than heading 8710. Once so classified, the exemption notification for the relevant goods applied.
Conclusion: The issue was decided in favour of the assessee. The vehicles were held classifiable under chapter heading 8705 90 00 and eligible for exemption under Notification No. 6/2006-CE.
Issue (ii): Whether the bullet-proofing activity, undertaken with material on which VAT was paid, was liable to service tax as Business Auxiliary Service or was correctly treated as Works Contract Service.
Analysis: The activity involved supply of material along with execution of the work, and VAT had been discharged on the material component. On that factual foundation, the activity answered the character of a works contract. A composite supply of goods and services of this nature could not be taxed as Business Auxiliary Service when the works contract classification was attracted.
Conclusion: The issue was decided in favour of the assessee. The activity was held to be Works Contract Service and not Business Auxiliary Service.
Issue (iii): Whether service tax was payable on renting of immovable property service for the relevant period when no consideration had been received.
Analysis: For the relevant period, tax liability arose on receipt basis. The record showed that no amount had been received towards renting of immovable property during the period in question, so the taxable event for collection of service tax had not occurred.
Conclusion: The issue was decided in favour of the assessee. No service tax was payable on renting of immovable property service.
Final Conclusion: The entire demand and the consequential penalties were unsustainable, and the assessee obtained full relief from the impugned order.
Ratio Decidendi: Vehicles specially designed and fabricated for policing or defence purposes, and not principally for transport of persons or goods, are classifiable as special purpose vehicles under chapter heading 8705; and a composite activity involving supply of material together with execution of work is to be treated as a works contract rather than as a separate taxable service of a different category.
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