2014 (11) TMI 582 - AT - Service Tax

Erection, Commissioning or Installation services - Imposition of interest and penalty - Held that - In this case the appellants have paid customs duty on the entire value which includes erection, commissioning and installation also, if at all, any assistance is provided. Moreover as submitted by learned counsel, erection, commissioning and installation was done by a local supplier. Moreover we also find considerable force in the submission that contract can also be considered as a works contract which came into levy only w.e.f. 01.06.2007 and issue has been referred to 5 Member Bench and therefore on that ground also when the demand is for extended period request for waiver can be considered favourably - Stay granted.

Issues Involved:
1. Liability to pay service tax on amount paid to foreign supplier for Freeze Drying Plant under Erection, Commissioning, or Installation services.
2. Applicability of abatement under Notification No. 1/2006 ST.
3. Allegation of suppression due to failure to inform the Department about the nature of services provided by the foreign supplier.
4. Whether the contract can be considered a works contract.
5. Eligibility for CENVAT credit on capital goods.
6. Invocation of extended period under Section 73 of the act.
7. Liability for interest and penalties.

Analysis:
1. The proceedings were initiated against the appellant for the payment of service tax on the amount paid to the foreign supplier for services related to the Freeze Drying Plant. The order-in-original found that the services fell under the category of Erection, Commissioning, and Installation services, making the appellant liable to pay service tax under Section 66A of the Finance Act, 1994. The difference in the value as per the agreement and the actual amount paid indicated consideration for the services. The appellant's failure to avail abatement under Notification No. 1/2006 ST and the allegation of suppression due to incomplete intimation to the Department were noted.

2. The appellant argued that the contract amount included the supervision for commissioning of the plant and that the entire value was declared for Customs Valuation. They contended that the contract could be considered a works contract, citing relevant legal precedents. The appellant also claimed that no services were rendered by the foreign supplier and that the value declared in the Bills of Entry was inclusive of all components, making the value of services zero. They emphasized that the local service provider in India discharged the applicable service tax.

3. The Tribunal considered the submissions, noting that the appellants had paid customs duty on the entire value, which covered erection, commissioning, and installation services. The Tribunal found merit in the argument that the contract could be viewed as a works contract, especially since the issue had been referred to a 5 Member Bench. Given these considerations and the demand for an extended period, the Tribunal decided to waive the requirement of pre-deposit and granted a stay for 180 days. The Tribunal ruled that no interest or penalty was payable in this case.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the Tribunal's decision on each aspect of the case.

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