2013 (6) TMI 468 - AT - Service Tax

Works contract service - supply and installation of Electronic Security and Safety Systems - The department wanted to treat the entire transaction as Works contract and levy service tax accordingly from the appellant. - Held that - The assessable value of the goods manufactured by the appellants, on which duty of excise was paid by them, was also included in the gross amount for the purpose of demand of service tax under Works Contract service whereas Rule 2 A of the Service Tax (Determination of Value) Rules 2006 as amended provides that the value of taxable service in relation to services involved in the execution of works contract shall be determined to be the gross amount charged for the works contract less the transfer of property involved in the execution of the works contract. The department has no case that no transfer of property in goods was involved in the execution of the purchase orders. Apparently, the appellant sold both manufactured goods and bought-out goods to their customers as evidenced by the relevant invoices. If that be so, the entire value will have to be kept out of the taxable value of Works Contract service, in which event nothing would be left to be taxed for levy of service tax. Nevertheless, in respect of installation of the bought-out components of the systems, the appellant admittedly paid service tax under the appropriate head. The appellant has made out a good case for waiver and stay. - Stay granted.

Summary

Issues:
- Appellant seeks waiver and stay against the impugned demand for service tax and education cess under the head "Works Contract" service.
- Determination of taxable value for service tax under 'Works Contract' service.
- Prima facie case for waiver and stay based on the value of goods manufactured and bought-out components.
- Reference to a previous stay order granted to the same assessee in a similar case.

Analysis:
The judgment addresses the issue of the appellant seeking waiver and stay against the demand for service tax and education cess under the head "Works Contract" service for the period from April 2009 to March 2010. The appellant was involved in supplying 'Electronic Security and Safety Systems' to customers, with a significant part of the system being manufactured by them and the rest being bought out. The appellant raised separate invoices for the manufactured and bought-out components. The department sought to treat the entire transaction as a "Works contract" and levy service tax accordingly. However, the Tribunal found a prima facie case for the appellant based on the determination of the taxable value for service tax under 'Works Contract' service.

The Tribunal noted that the assessable value of the goods manufactured by the appellant, on which excise duty was paid, was included in the gross amount for the purpose of demanding service tax. However, Rule 2A of the Service Tax (Determination of Value) Rules 2006 provides that the value of taxable service in works contract should be the gross amount charged less the transfer of property involved. As the appellant sold both manufactured and bought-out goods to customers, the entire value should be excluded from the taxable value of "Works Contract" service. The appellant had paid service tax for the installation of bought-out components and excise duty on manufactured components. Citing a previous stay order for the same assessee, the Tribunal granted waiver of predeposit and stay of recovery in respect of the adjudged dues.

In conclusion, the judgment provides a detailed analysis of the determination of taxable value for service tax under 'Works Contract' service and establishes a prima facie case for the appellant based on the value of goods manufactured and bought-out components. The reference to a previous stay order granted to the same assessee strengthens the decision to grant waiver and stay against the demand for service tax and education cess.