TaxTMI 
TaxTMI 
2024 (9) TMI 1251
X X X X Extracts X X X X
X X X X Extracts X X X X
....nstallation and commissioning of this machine. The case of the department is that the erection, commissioning and installation activity of the machines manufactured and supplied by the appellant is taxable service and the same is liable to service tax. Therefore, the show cause notice dated 19.01.2010 was issued proposing demand of service tax. The adjudicating authority after relying on various judgments and considering the fact of the case dropped the proceeding of all the three show cause notices. Being aggrieved by the said Order-In-Original dated 15.03.2017 Revenue filed the present appeal. 2. Shri Sanjay Kumar, Learned Superintendent (AR) appearing on behalf of the Revenue appellant submits that the erection, commissioning and installation activity of the machine is independent to the manufacturing activity and the same is liable to service tax. The appellant are legally liable for the payment of service tax on such service. He submits that eventhough there is no separate consideration for providing sales services but the same is included in the sale value which has to be separated and service tax thereon is chargeable. 3. Shri Amal Dave, Learned Counsel, appearing on b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ough the impugned order. Some of the undisputed facts in the present case are that, appellants are primarily and mainly engaged in the manufacture of textile machinery. A contract entered into by them with their buyers for a lump sum amount and the sale price is inclusive of installation and commissioning charges. It is also not disputed that appellants have paid the Central Excise duty on the complete value and have not claimed any deduction on account of installation and commissioning charges. In fact, no segregated amount stands arrived at in the contract towards the installation or commissioning charges. This is also undisputed that the appellants have availed the services of sub-contractors in respect of erection, installation and commissioning and such sub-contractors have paid service tax on the same which subsequently stands reimbursed by the appellant. 9. In view of the factual back drop, we may now refer to the definition of erection, commissioning and installation, as available in Section 65 (39a) of the Finance Act, 1994 :- (I) From 10-9-2004 to 15-6-2005 "erection, commissioning or installation" means any service provided by a commissioning a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....observed that where the assessee is paying Central Excise duty on the manufacture and sale of medical equipments on the total value recovered by them from their customers and where the activities of erection, commissioning and installation of equipments is a part of sale of excisable goods and where there is no separate charging for erection and commissioning of equipments, levy of service tax on such activities cannot be held to be proper and legal. The Tribunal held that activity of installation, erection and commissioning was incidental to the deliver of goods to the customers and as such, no service tax can be confirmed against the appellants. 11. Learned advocate has also drawn our attention to the decision of the Hon'ble High Court of Madhya Pradesh in the case of Maa Sharda Wine Traders v. UOI - 2009 (15) S.T.R. 3 (M.P.), the question placed before the Hon'ble High Court was as to whether bottling of liquor amounts to manufacture of liquor or only packaging so as to attract service tax. The Hon'ble High Court observed that whether activity amount to manufacture or not it is incumbant to take note of any process which is incidental or ancillary to the completion of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n this case even though the position of the machine in CKD condition gets transferred to the buyer when it is removed from the factory as per the contract, the question to be examined is whether such a service is related directly or indirectly to the manufacture of their goods in question. As already mentioned by me earlier, the process of erection and commissioning at the buyer's premises is incidental to the manufacture of the machine and therefore the erection and commissioning services provided also can be said to be in relation to the manufacture, since the process in this case is complete only after the erection and commissioning takes place." The above observation made by the Tribunal, even though the issue involved was availment of Cenvat credit of service tax paid by them on erection and commissioning services, supports the appellant's case. 13. The Tribunal judgment in the case of Neo Structo Construction Limited - Order No. A/338-339/WZB/AHD/2010 dated 18-3-2010 [2010 (19) S.T.R. 361 (T)] was also produced before us in support of the contention that where the activities amounts to manufacture and excise duty is being paid on the entire contract val....
X X X X Extracts X X X X
X X X X Extracts X X X X
....des and on perusal of the record, it is seen that the representative of the appellants in his statement dated 13th October, 2005 stated that OBDI contained the total cost of equipment including the cost of machine and value of optional services such as erection and commissioning of machines and equipment sold by them. In reply to show cause notice, the appellants contended that they had been paying duty on the total invoice value of medical equipment charged from the customers, which establishes the activity of installation, commissioning or erection had been considered as part of sale. On perusal of the copy of the Central Excise invoice and the Annexure VI to the show cause notice, we find that the demand of tax was determined on the basis of Central Excise invoice value, as taxable value. It is also noticed that for some periods, taxable value has been taken as 33% of invoice value in terms of the Notification No. 19/2003-S.T. dated 21-8-2003 as amended. In some cases, total invoice value has been taken as taxable value since the appellant was availing Cenvat credit of invoice and benefit under Notification No. 19/03-S.T. dated 21st August, 2003 cannot be availed. The learned Ad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s to transfer for a price a chattel in which the transferee had no previous properly, then the contract is a contact for sale. Ultimately, the true effect of an accretion made pursuant to a contract has to be judged not by artificial rules but from the intention of the parties to the contract. In a 'contract of sale', the main object is the transfer of property and delivery of possession of the property, whereas the main object in a 'contract for work' is not the transfer of the property but is one for work and labour. Another test often to be applied to is: when and how the property of the dealer in such a transaction passes to be customer is it by transfer at the time of delivery of the finished article as a chattel or by accession during the procession of work on fusion to the movable property of the customer? If it is the former, it is a sale if it the latter, it is a 'works contract'. Therefore, in judging whether the contract is for a sale or for work and labour, the essence of the contract or the reality of the transaction as a whole has to be taken into consideration. The pre-dominant object of the contract the circumstances of the case and the custom of the trade provides ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arged thereon. So, the case laws relied upon by the learned DR are not applicable herein. 10. In view of the above discussion, we find that the demand of tax and penalties are not sustainable. Accordingly the impugned order is set aside. The appeal is allowed with consequential relief. • M/s. Rahil Air Bubbles Pvt. Ltd.- Final Order No. A/11894/2019 dated 17.09.2019. 4. We have carefully considered the submission made by both sides and perused the records. We find that the entire transaction is of purchase of imported bubble wrap machines. The appellants have discharged custom duty considering the total value of machine shown in the invoice. There is no separate charge for service such are erection and installation of such machinery. On the total value of the invoice, Custom duty was paid. The erection and installation is incidental to the sale/supply of the machine. Therefore, the entire transaction is of sale and purchase of the machine and, hence, no service is involved. Therefore, no Service Tax can be demanded. This issue is squarely covered by the Tribunal judgment in the case of Bhavik Terryab (supra) wherein the Tribunal has passed the followi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the matter is remanded, all other issues are kept open including the question of time bar raised by the appellant. Accordingly, the appeal is allowed by way of remand." From the above judgment, which is relied upon various decisions of this Tribunal where it was held that in case of import of machine including the erection and installation, it is not permissible to artificially bifurcate the service value from the total value. Accordingly, no Service Tax can be demanded for such import. Being an identical issue and the facts involving in the present case, it is squarely covered by the judgment of Bhavik Terryab (supra). Following the ratio of the said decision, we set aside the impugned order and allow the appeal. From the above judgments, it is settled that where the entire value of the goods is towards sale of the goods and subjected to excise duty/customs duty no part of the same can be said to have been collected towards any service. Therefore, involving the same set of facts, in the present case where the entire value has suffered excise duty and the buyer is under obligation to not only manufacture and supply the machinery but also to carry out activity of e....