TaxTMI 
TaxTMI 
2024 (10) TMI 381
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....uck. 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 else. The Appellant has been following said p....
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....nd 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 very same contract discusses the fact that the all th....
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..... 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 projects Pvt. Ltd. 2022 (59) GSTL 95 (Tri- Ahmd.) * Allengers Medical Systems Ltd. 2009 (14) S....
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....refore, 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 shall apply to,- (A) the functions performed by the Members of Parliament, Members of State Legislative, Members of Panchayats, Members of Municipalities and Me....
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....deration 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 manufacture and sale of Draw Texturizing Machines is Rs.1,39,84,000/- on which the excise duties have been charged and paid. From the show cause notice, as per Annexure A to show cause notice for the purpose of charging service tax against the ....
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.... 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 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 stan....
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....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 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 ....
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....n 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 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, ev....
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.... 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 duty liability in terms of Section 4 of the Central Excise Act, 1944 and had not claimed any deduction, exclusion, abatement towards installation charges, they cannot be taxed under the provisions of Section 65(39) ibid, considering the appellant as a service provider. It is an admitted fact on record that on the entire value including installation of the machine, the Central Excise duty had been paid by the appellant and retained by the Government under such heads of account, t....
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....fore, 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 necessary to supply RMC in a specialized container and after reaching at the customer's site RMC is delivered by carrying out the process of pouring, pumping and laying of concrete at the customer's place. The RMC cannot be unloaded at a particular place and thereafter shifted the same to the particular place at site. Due to peculiar nature of RMC, it is unavoidable to deliver at particular place where the RMC is required to be laid-down. It is also the fact that appellant being manufacturer of RMC, paying exci....
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....hrows 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 supply of ready mix concrete and carrying out the ancillary and incidental activities of pouring, pumping and laying of concrete would call for service tax liability or not. Tribunal in the case of 2. GMK Concrete Mixing Pvt. Ltd. v. CST, Delhi reported in 2012(25) S.T.R. 357 (Tri. - Del.) has held that the entire exercise is sale of ready mix concrete and there is no service element involved so as to create service tax liability against the assessee. By following the said decision, we set aside 3. the impugned order and allow the appeal with c....
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.... 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 contracts one is manufacturing fanta and coco-cola and the assessee was delivering those products at his site. The customer had an option to transport those goods from the site of the manufacture to his site, either by using his own transportation or by using the transportation facility provided by the assessee. The transportation provided by the assessee is including taking delivery of the goods from the manufacturing place to the customer's site, which contract is conspicuously missing in this case. The assessee at no point of time will take delivery of RMC from the customer and the....
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.... 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 position, the department should have taken the service portion for calculating the service tax. Accordingly, the service tax was wrongly calculated to the above extent. 16. It was also the submission of the appellant that alternatively the Revenue should have calculated the service tax only on 40% of the gross value by allowing abatement of 60%, in terms of Rule 2A(ii). The said rule is reproduced below :- "2A(ii)Where the value has not been determined under clause (i), the person liable to pay tax on the service portion involved in the execution of the works contract shall determine the service tax payable in the following ma....
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.... "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 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 ....
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....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 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 ....
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.... 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 our attention stands drawn. There is no clause directly on the issue, requiring the assessee to do the installation and commissioning of the Fire Hydrant System. The various clauses are only to the effect that after the delivery of the goods, the respondent has to depute competent technical people for assembly, erection and commissioning and if the assessee is not available during the commissioning, etc., there is a penalty clause. 9. Learned Advocate explains that inasmuch as the goods supplied by them are of technical nature, the assistance of the supplier was sought for installing the same. The various clauses referred to by the learned DR only refers to the presence of the assessee's technical persons, during the course of erection and commissioning. There is....