AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (8) TMI 319
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....Design Services on the remittances made by the Appellant to certain foreign entities during F.Y. 2008-09 and 2009-10 in respect of Design charges paid by the Appellant. 3. Briefly stated, the facts of the case are that the Appellant was engaged in the manufacture/ fabrication of the prefabricated/ pre-engineered steel structures and their parts and the installation and commissioning thereof. The Appellant was engaged as a sub-contractor in the execution of the Delhi International Airport Project [DIAL Project] (Terminal T-3), i.e. DIAL Project of M/s. Delhi International Airport Ltd., wherein M/s. Larsen & Toubro Ltd [M/s L & T]. was engaged as the main contractor. M/s. L & T had entered into two separate Agreements dated 06.03.2008 and 02.04.2008 with the Appellant, engaging the Appellant as 'sub-contractor' for the supply of 'T-03 Roof Sheeting and associated works' and 'T-03-02.2 Piers Structural Steel Works' as per the specifications respectively. The sub-contracts entered into with the Appellant also involved the erection, installation and other associated works at the site. 4. The Appellant, in turn, placed a Purchase Order dated 30.04.2008 on M/....
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....y the Appellant to the said foreign entities, in terms of the provisions of Section 66A of the Act, on the grounds stated therein. Consequent upon the adjudication proceedings held on the SCN, the Commissioner passed the Order-in-Original dated 23.01.2017, confirming the demand of service tax of Rs.1,42,48,828/- raised against the Appellant under Section 73(2) of the Act, along with the interest thereon under Section 75 of the Act, and imposing a penalty of Rs.10,000/- under Section 77 and Rs.1,42,48,828/- under Section 78 on the Appellant in view of the findings recorded therein. Hence the present appeal before the Tribunal. 7. The learned Advocate made the following submissions:- 7.1 The impugned order is unsustainable in law in as much as the SCN itself was vague, non-specific and invalid. As is evident from the perusal of paragraphs 5 and 9 of the SCN, the design charges paid by the Appellant were considered liable to be taxed under reverse charge simultaneously under two taxable categories, viz. Design Services and Commercial and Industrial Construction services. He submitted that, assuming the liability on design charges paid by the Appellant under reverse charge, the D....
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....itted that the reliance placed by the Commissioner on the judgement of the Tribunal in the case of Alstom Projects (India) Ltd. vs. CST - 2011 (23) S.T.R. 489 (Tri.-Del.) was misplaced as in this case, the main issue for consideration before the Tribunal was whether the services of "Consulting Engineer's Services" and "Erection, Installation or Commissioning Service" provided as a works contract or part of works contract could be charged to service tax during the period prior to 01.06.2007 or not. While the Tribunal upheld the levy of service tax on such contracts during the period prior to 01.06.2007, the judgement stood impliedly overruled in view of the judgement of the Hon'ble Supreme Court in the case of Commissioner v. Larsen & Toubro Ltd. - 2015 (39) S.T.R. 913 (S.C.). He further submitted that though in Alstom's case, the Tribunal departed from the view taken in Daelim's case (supra), in view of the affirmation of the judgement of the Tribunal in Daelim's case by the Hon'ble Supreme Court in 2004 (170) E.L.T. A 181 (S.C.), the judgement in Alstom's case, holding that a service component in a composite contract of sale of goods and service could be subjected to l....
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....tractor'. This belief was widely held by the service providers engaged as 'sub-contractors' in the execution of the projects for the construction of airports, ports, etc. The legal position was only later clarified by the CBEC by Circular dated 21.10.2011. The ld. Advocate further submitted that the issue involved related to the statutory interpretation and, therefore, the allegation of willful suppression of facts with an intent to evade payment of service tax and the findings of the Commissioner upholding the same are unjustified and not maintainable in law. It is pertinent to note here that the Department itself was uncertain about the classification of the so-called design service, as is evident from the fact that in the SCN, the said service was considered classifiable and taxable under two taxable categories, namely viz. Design Service and Commercial and Industrial Construction Service simultaneously. He also argued that the Appellant had also recorded all the transactions in its books of accounts, and there was no attempt by the Appellant to hide or camouflage any transaction with M/s Corus. The demand was raised on the basis of the information recorded in the bo....
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.... Calculations, Test Certificates, Submittals, providing technical support, supply of roll formers and technicians at site and roll forming. 11. On careful perusal of the contract placed by the Appellant with M/s. Corus, we find that it involved the supply/provision of various services described above, which were integral and inseparable parts of the contract. We also find that the contract did not involve nor envisage the provision of 'Design and drawing services' independently and on a standalone basis. Even the submission of Design and Drawings involved in the contract was integrally connected with other services to be provided by M/s. Corus in terms of the Contract as is evident from clause 9 titled 'Design' of the Contract, which is reproduced below:- '9. Design i) Corus will prepare Kalzip layout drawings, shop drawings & details and interface details for submission to Interarch. Substructure drawings to be prepared by Interarch. Corus to provide all necessary Technical Help and support required for the job of no extra cost, including calculations, test certificates and submittals'. We, thus, find that there was no provision or supply of an....
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.... party to complete the DIAL project and finally construction done at DIAL by the party. So, the services provided by M/s. Interarch Building Product Pvt. Ltd. as sub-contractor not treated as independently provided for completion of the main contract as the party used the Roofing Systems material for project of pre-fabricated steel building of M/s. DIAL because the Roofing systems material received by the party and used by the party themselves to complete the project of DIAL, so, the exemption from payment of service tax not appears to be available to the party and the design charges paid by the party are liable to be taxed under reverse charge in commercial & industrial construction service." [Emphasis provided] The above contradictory conclusions were drawn by the Department based on the statutory definitions of 'Design Services' and 'Commercial and Industrial Construction Service' and the CBEC's Circular No.147/16/2011-Service Tax (F. No. 137/57/2011-Service Tax) dated 21.10.2011. 14. We find that the SCN was per se bad in law and invalid as it failed to establish the classification of the said services under any specified taxable category. We find....
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....t and the liability to tax under the appropriate fiscal legislation authorizing the levy and collection of such tax is a matter for determination with precision and clarity and not by a process of guess-work or speculation. 11. Neither the show cause notice dated 21-10-2011 nor the impugned adjudication order dated 18-1-2013 record any assertion/conclusion whatsoever as to which particular or specific taxable service the appellant had provided. In the absence of an allegation of having provided a specific taxable service in the show cause notice and in view of the failure in the adjudication order as well, neither the show cause notice nor the consequent adjudication order could be sustained." [Emphasis provided] The judgement of the Tribunal was affirmed by the Hon'ble Delhi High Court as reported in 2016 (42) S.T.R. J312 (Del.). We note that in this case, the SCN alleged rendering of the taxable services which were considered as classifiable either under 'Management, Maintenance or Repair Service' or 'Erection, Installation and Commissioning Service' and other construction linked services as defined under the Finance Act, 1994. 15.3 In Bala....
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.... in Section 65 (36b) and Section 65 (105) (zzzzd) of the Act read as follows:- "S.65(36b) - "Design services" includes services provided in relation to designing of furniture, consumer products, industrial products, packages, logos, graphics, websites and corporate identity designing and production of three dimensional models." "S.65(105) (zzzzd) - "Taxable Service" means any service provided or to be provided to any person, by any other person in relation to design services, but does not include service provided by - (i) an interior decorator referred to in sub-clause(q); and (ii) a fashion designer in relation to fashion designing referred to in sub-clause(zv); and the term "service provider" shall be construed accordingly. " 18. We find that the 'Design Services' as defined, covered the services of designing provided in relation to the specified goods/intangibles, viz. furniture, consumer products, industrial products, packages, logos, graphics, websites and corporate identity designing and production of three dimensional products. The products, viz. Kalzip Aluminium Roofing Sheets and other related items were structural material, m....