TaxTMI 
TaxTMI 
2024 (10) TMI 381
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....not be cleared and transported in one truck. Thus, different portions of machine were cleared in different trucks / consignments, which together constitute one complete machine. The Appellants discharged the applicable Central Excise Duty on the Manufacture and sale of the said Machines; Appellant did not recover any other charges from their customers, the same is evident from the Invoices annexed to the Appeal. 1.2 In terms of Trade Notice No. MP/29/83 dated 23.03.83, the Appellant was intimating the C. Ex. Department that they will be clearing the machines in staggered manner and also undertook to pay entire duty on clearance of first part of the Machine from the factory. Appellant submits that in some of the contracts, erection charges have also been said to be inclusive in the price of machine and in those cases also the Appellants were paying Central Excise duty on the entire price of the machine, as quoted in the contract, and except for the said price of machine, no other charge / consideration was received by the Appellants. The perusal of contract in whole, clearly demonstrates that the contract is for sales supply of "Draw Texturizing Machines" and not for anything els....
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....idental or ancillary activity to the manufacture and sale of the machine. He referred to Section 2(f) of the Central Excise Act, 1944 and submits that sending of supervisors for supervising of assembling of machine at the customer's premises will squarely fall under the sub clause (i) of Section 2(f) as the process of assembling complete machine at the machine purchaser's premises will be incidental or ancillary to the completion of a manufactured product i.e. draw texturizing machine, manufactured and cleared by the appellants. He submits that the Ld. Adjudicating Authority wrongly relied upon the judgment in the Prag Bosimi Synthetics Ltd., for the reason that the contention of the Ld. Adjudicating Authority with reference to the contract of the appellant that the contract is clear that it does not only supply or sale of machine but also the service portion therein towards installation, erection and commissioning at the factory premises of the customer. 2.1 He submits that Ld. Adjudicating Authority failed to appreciate terms of the contracts in proper perspective. In fact, the contract is clear that the said contract is sale of machine as detailed in the order. Further, the v....
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.... suppression with intent to evade payment of service tax. The Ld. Adjudicating Authority failed to appreciate that the question before him was to whether the department was justified in invoking the extended period of limitation for the purpose of issuing the subject show cause notice. The Ld. Commissioner failed to appreciate that before first clearance from their factory they had informed jurisdictional division office about clearance of machine in part which in other words implies that machines will be assembled at buyer's premises. He submits that a mere making sweeping statement that appellants suppressed the fact with intent to evade payment of service tax does not per se justify invocation of the extended period of limitation. The appellant being a bonafide assessee had discharged the central excise liability on the entire value of the machine. Thus, no willful misstatement or suppression of fact can be attributed to the appellant. In support of his submission, he placed reliance on the following judgments:- • Alidhara Texspin Engineers 2010 (20) STR 315 (Tri-Ambd) • Essae Teraoka Ltd. 2022 (65) GSTL 466 (Tri Bang) • Wagad Infra project....
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....s the sale of the goods. As per Section 65 B (44), the definition of 'Service' exclude the transaction of sale. Therefore, for the period post 01.07.2012 the sale of goods does not fall under the activity of service. For the ready reference, the definition of service provided under Section 65 B (44) is reproduced below:- "(44) "service" means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include- (a) an activity which constitutes merely,- (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of Article 366 of the Constitution, or (iii) a transaction in money or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relation to his employment; (c) fees taken in any Court or tribunal established under any law for the time being in force. Explanation 1. - For the removal of doubts, it is hereby declared that nothing contained in this clause....
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....ing observed above that the so called erection is part of sale of goods and no separate consideration is provided for any service. No service tax can be demanded. For demanding service tax, one of the important criteria is that the consideration has to exist in the course of service. In the present case, the entire value of machine is consideration towards the sale of machine on which admittedly excise duty has been paid. Therefore, no consideration left out which can be said as service charge. Therefore, for this reason also in absence of any consideration towards the service, no service tax demand is sustainable. We find that the legislature made a provision for service and taxability thereon, keeping in mind that whichever activities are other than manufacture and sale of goods only those activities can be subject to service tax. Therefore, in the present case entire activity of the appellant is of manufacture and sale of goods, no service exist to be charged service tax thereon. For making it further clear the transaction in the present case, we scanned below a sample invoice of the appellant:- 4.2 From the above invoice it can be seen that the assessable value towards manuf....
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....r's site even if, there is some charges for erection and installation separately charged, the same shall be included in the assessable value of excisable goods for the purpose of charging excise duty. The present case of the appellant is on better footing that there is no separate charges for erection. Therefore, there is no question of existence of any charges towards erection of excisable goods. Therefore, in view of the clarification there is no doubt that in case of manufacture and sale of excisable goods and erection and installation thereof the total value is subject to Central Excise duty. Hence, consequently, no service tax can be demanded on such activity. This issue has been considered in various judgments, some of the judgments are referred below:- a) Alidhara Texspin Engineers 2010 (20) STR 315 (Tri-Ambd) "8. We have considered the submissions made by both the sides and have gone through 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 o....
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.... or air-conditioning including related pipe work, duct work and sheet metal work, or (d) thermal insulation sound insulation fire proofing or water proofing (e) lift and escalator fire escape staircases or traveators; or (f) such other similar services. As is seen from the above, the one of the ingredients of the definition is that services must be provided by commissioning and installation agency. Admittedly, the appellant is not an agency engaged in providing services of Installation, erection and commissioning etc. They are essentially a manufacturing unit engaged in the manufacture of textile machinery, which is undertaken to be supplied to their customer in a fully commissioned state. 10. Tribunal in the case of Allengers Medical Systems Limited v. Commissioner of Central Excise, Chandigarh - 2009 (14) S.T.R. 235 (Tri.- Del.) in an identical set of facts and circumstances has 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 pa....
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....k and once the purchaser enters into an agreement for supply of the machine including the erection and commissioning charges, the responsibility for erection and commissioning is of the manufacturer. Therefore what is happening in this case is that the supplier of the machine is not only selling the machine but is also providing the service of erection and commissioning. Once erection and commissioning cost is included, in the transaction value the natural conclusion that would emerge is that the processes undertaken in the buyer's premises are actually incidental to manufacturing activity undertaken in the manufacturer's premises. What has been sold in this case is the complete machine duly erected and commissioned' and operational. The incidental process of erection and commissioning being incidental to manufacture, has to be treated as continuation of the earlier process which started in the manufacturer's premises. In 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 ....
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....he year 2006 whereas the Allengers Medical Systems judgment stands passed in the year 2009, which stands passed after considering the Hon'ble Supreme Court judgment in the case of State of Andhra Pradesh v. Kone Elevators (India) Limited - 2005 (181) E.L.T. 156 (S.C.), as also Tribunal decision in the case of Idea Mobile Communications Limited v. Commissioner - 2006 (4) S.T.R. 132 (Tribunal). 15. In view of our above discussions, we hold that appellants were not liable to pay any service tax. Accordingly, the impugned order confirming the demand and imposing penalties upon them is set-aside and appeal is allowed with consequential relief. Inasmuch as we have allowed the appeal on mere, the issue of demand being barred by limitation is only of academic interest and its not being gone into." b) Essae Teraoka Ltd. 2022 (65) GSTL 466 (Tri Bang) "5. On perusal of the case records, we find that the appellant had not separately charged, billed or received any amount from the customers towards installation charges for installing the weighing machine at the customer site. Since on the entire value of excisable goods, the appellant had discharged the Central Excise....
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....cidental to the manufacture of the machine and therefore, the erection and commissioning services provided can also be said to be in relation to the manufacture and not a service, in order to fall within the purview of service tax net. 7. In view of the foregoing discussions and analysis and more specifically, the judgments relied upon by the Learned Advocate for the appellant, we are of the view that the issue arising out of the present dispute is no more open for any debate. Therefore, the impugned order cannot be sustained for judicial scrutiny. Accordingly, the impugned orders are set aside and appeals are allowed in favour of the appellants." c) Wagad Infraprojects Pvt. Ltd. 2022 (59) GSTL 95 (Tri- Ahmd.) "11. We have carefully considered the submissions made by both the sides and perused the record. The entire case of the department is based only on the contract between the supplier of RMC i.e. appellant and buyer of RMC. As per the contract, the entire transaction is of Works Contract. However, the appellant is mainly engaged in the manufacture of Ready Mix Concrete and selling the same to various buyers. As per the nature of product, it is necessa....
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....ract. In various judgments this issue has been considered time and again. Some of the judgments are cited below :- (1) GMK Concrete Mixing Pvt. Limited v. Commissioner of Service Tax - 2012 (25) S.T.R. 357 (Tri. - Del.) "5. Record does not reveal involvement of any taxable service aspectin the entire supply of RMC. Rather the contract appears to be a sales contract instead of a service contract. In absence of cogent evidence to the effect of providing taxable service, primary and dominant object of the contract throws light that contract between the parties was to supply Ready Mix Concrete (RMC) but not to provide any taxable service. Finance Act, 1994 not being a law relating to commodity taxation but services are declared to be taxable under this law, the adjudication made under mistake of fact and law fails." The above decision of the Tribunal was upheld by the Hon'ble Supreme Court, reported at - Commissioner v. GMK Concrete Mixing Pvt. Limited - 2015 (38) S.T.R. J113 (S.C.). (2) Vikram Ready Mix Concrete (P) Limited v. Commissioner of Service Tax "Both sides agreed that the short issue involved in the present appeal is as to whether....
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....n the charges collected by the assessee from the customer as pumping charges form part of the sale price. If the RMC is not delivered through pumping, then the charges is not collected from the customer and it will not form part of the sale price. Therefore, the sale transaction of the RMC gets completed only when it is delivered at the point where it is finally put to use. All expenses incurred till such stage, if such delivery includes the service of pumping then the pumping charges are also included in the pre-sale expenses and hence, form part of the taxable turnover. In a contract of this nature, there is no dual role played by the assessee. He is not pumping the RMC for and on behalf of the customer. He has to pump the RMC to the specified place as shown by the customer in order to deliver the RMC. Therefore, even if the pumping charges are collected separately as is clear from the invoice produced before us, or as per terms of the contract, still the said pumping charges invariably form part of the sale transaction which facilitates the delivery of the goods and it would form part of pre-sale expenses. In the aforesaid judgment of the apex court, there were two cont....
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....ons about quantification of demand inasmuch as the impugned order confirmed the demand on the 60% of the value of contract whereas, as per Rule 2A(i), the value of goods should be adopted and only service portion should be charged for service tax. The relevant Rule 2A(i) is reproduced below :- "2A. Determination of value of service portion in the execution of a works contract. - Subject to the provisions of section 67, the value of service portion in the execution of a works contract , referred to in clause (h) of section 66E of the Act, shall be determined in the following manner, namely :- Value of service portion in the execution of a works contract (i) shall be equivalent to the gross amount charged for the works contract less the value of property in goods transferred in the execution of the said works contract." In view of the above rule, for the purpose of determination of value, we find that the value of goods needs to be deducted from the gross value charged by the appellant. As per the facts, it is clear that there is clear identification of value of goods and charges for pumping and laying of RMC which is ranging from Rs. 200 to Rs. 300. In this positio....
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....eriod of demand. Accordingly, the demand for longer period in the show cause notice dated 3-5-2016 is not sustainable on the ground of limitation also. 19. As per our above discussion and findings, we are of the clear view that activity of the appellant is entirely of excisable activity. Therefore, the same will not fall under Works Contract service in terms of Finance Act, 1994. Accordingly, the demand of service tax raised under Works Contract service is clearly not sustainable. Therefore, the impugned order is set aside, appeal is allowed with consequential relief, if any, in accordance with law." d) Allengers Medical Systems Ltd. 2009 (14) STR 235 (Tri-Del) "4. After hearing both the sides 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 cu....
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....e main object of contract is transfer of finished goods, it is contract of sale. If the main object is work and labour and property passing by accessories during the process of work to the movable property of customer, it is works-contract. The relevant portion of the decision of the Hon'ble Supreme court in the case of Kone Elevators (I) Ltd. supra is reproduced below : "It can be treated as well settled that there is no standard formula by which one can distinguish a 'contract for sale' from a 'works contract'. The question is largely one of fact depending upon the terms of the contract including the nature of the obligations to be discharged there under and the surrounding circumstances. If the intention is 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 trans....
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....ing of the property. (c) In the case of Imagic Creative Pvt. Ltd. (supra), the issue is whether the service provider paying service tax is liable to Sales Tax/VAT which are mutually exclusive. It has been held that having regard to the respective parameters on service tax and the sales tax as envisaged in a composite contract, from an indivisible contract levy would be determined. 9. We find that in the instant case, the appellant engaged on business of manufacturer and sale of medical equipment and no separate contract for erection and installation of the medical equipments. The erection and installation charges are covered in the value of the medical equipments and the central excise duty was discharged 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." e) Commr C.Ex Indore Vs Sharma & Associates 2017 (51) STR 289 (Tri. Del) "8. We have gone through the entire purchase order and the various clauses to which o....
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....tract, requires the assessee to undertake the job of erection and commissioning, etc. No value of the said services stand separately mentioned in the purchase order. 11. We also find favour in the assessee's contention that in terms of Notification No. 12/2003-S.T., the value of the goods has to be taken out for the purpose of arriving at the value of services, if any. If the entire value of the goods stands taken out from the total contract value, nothing survives for the services, alleged to be supplied by the assessee. As such, we find no infirmity in the views adopted by Commissioner (Appeals), requiring any interference by the Tribunal. Accordingly the appeal filed by the Revenue is rejected." 4.4 In view of the above judgments, it can be seen that the identical facts are involved in the present case as well as the judgments cited above. Therefore, the ratio of the above judgment is directly applicable to the facts of the present case. As regard the grounds taken by the appellant regarding invocation of extended period and confirmation of demand thereunder, we find that it is fact on record that the appellant are registered with Central Excise department, dischargi....