Tribunal Rules No Service Tax on Installation of Imported Machinery; Demand Time-Barred Due to Late Notice Issuance.

The tribunal set aside the impugned order and allowed the appeal, ruling that no service tax was applicable on the Erection, Commissioning, and Installation Service of imported machinery. It concluded that the service was part of the sale value and provided by an Indian company, not meeting reverse charge mechanism criteria. Additionally, the tribunal determined that the demand was time-barred as the show cause notice was issued beyond the extended period, with no suppression of facts found.

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Issues involved:
The issues involved in the judgment are the demand for service tax on Erection, Commissioning, and Installation Service of imported machinery and the applicability of the extended period for issuing a show cause notice.

Summary:

Issue 1 - Demand for service tax on Erection, Commissioning, and Installation Service:
The appellant imported machinery from Italia, including services for installation and commissioning. The department demanded service tax on the service portion as per Notification No.1/2006-ST. The appellant argued that the service was included in the sale value, and no service tax could be demanded. They also contended that the service was provided by an Indian company, not the overseas supplier, thus not fulfilling the criteria for levying service tax under reverse charge mechanism. The tribunal agreed with the appellant, stating that the total value represented the sale value, and no service tax was applicable. Additionally, as the service was provided by an Indian company, the requirements for charging service tax under reverse charge mechanism were not met. The tribunal found no suppression of facts and deemed the demand time-barred as the show cause notice was issued beyond the extended period.

Issue 2 - Applicability of the extended period for issuing a show cause notice:
The appellant argued that since the import of the machine was through Customs and duty was paid, there was no suppression of facts. The tribunal concurred, stating that the audit party raised objections from the appellant's records, indicating no suppression of facts. As the show cause notice was issued beyond the extended period, the tribunal deemed the entire demand time-barred.

The judgments cited by the appellant supported their case, leading the tribunal to set aside the impugned order and allow the appeal.

( Pronounced in the open court on 19. 02. 2024 )

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