2015 (9) TMI 1093 - AT - Service Tax

Erection, commissioning or installation service and consulting engineer service - Penalties under Sections 76, 77 and 78 - Held that - Appellant was required to supply the plant and provide supervision of erection and commissioning thereof for which it was to depute its engineers for 30 man days at site in 3 visits free of cost - there has been no charge for such supervision which has been provided free of cost. Thus there is no consideration received for such supervision. A careful perusal of the purchase order makes it clear that notwithstanding its subject-title, it is essentially for supply of limestone crushing plant. Even if it is held that there was a service component in the form of supervision of erection and commissioning of the plant supplied, the said service was manifestly rendered free of cost and thus no service tax liability can arise in this case as the value of the goods supplied cannot be included in the assessable value even as per Notification No. 12/2003-ST as no Cenvat credit has been taken by the appellant in respect of such goods. - impugned service tax demand is not sustainable and therefore the same is set aside - Decided in favour of assessee.

Summary

Issues:
Service tax demand confirmation for erection, commissioning, or installation service and consulting engineer service.

Analysis:
The appeal was filed against the Order-in-Original confirming a service tax demand for the period from 1.7.2003 to 31.3.2005 for services provided to M/s Vikram Cement. The appellant argued that the purchase order was for the supply of a plant and not for the provision of erection, commissioning, or installation services. The appellant contended that the supervision of erection and commissioning was provided free of cost and was incidental to the sale of the plant. Citing relevant case laws, the appellant emphasized that the value of the goods supplied cannot be included in the assessable value for service tax purposes.

The Departmental Representative (DR) argued that commissioning was an integral part of the purchase order, indicating that erection, commissioning, or installation services were indeed provided. However, the Tribunal examined the purchase order details and found that the supervision of erection and commissioning was provided free of cost, with no consideration received for such services. The Tribunal referred to a judgment by the Andhra Pradesh High Court to support the view that such supervision, when provided free of cost, is incidental to the sale and not subject to service tax.

The Tribunal concluded that the entire demand was confirmed based on the full value of the purchase order, which primarily involved the supply of the plant. As the supervision services were provided free of cost and were incidental to the sale, the Tribunal held that no service tax liability could arise in this case. Additionally, since no consideration was received for the supervision services, they could not be included in the assessable value for service tax purposes. The Tribunal set aside the service tax demand, ruling in favor of the appellant based on the analysis of the purchase order details and relevant legal principles.

This comprehensive analysis of the issues involved in the legal judgment highlights the arguments presented by both parties, the interpretation of the purchase order terms, the application of relevant case laws, and the Tribunal's reasoning leading to the decision to set aside the service tax demand.