2018 (9) TMI 32 - AT - Service Tax

Service or not? - appellant manufactured require tools in their factory and used the same for manufacture of final product to be exported to the General Electric Company USA - Held that -There was no service involved in the present case and the amount received by the appellant to the tune of ₹ 58,02,925/- was used for development of tools and said tools were manufactured within the factory of appellant - there is no case for levy of service tax - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the consideration received by the appellant for the development of tools constitutes a service attracting service tax liability?

Analysis:

The appeal before the Appellate Tribunal CESTAT ALLAHABAD arose from an Order-in-Appeal passed by the Commissioner (Appeals) Customs & Central Excise, Noida. The case involved the appellant engaged in manufacturing Bullet Proof Jackets, Safety Helmets, and machinery parts, receiving an order from General Electric Company USA for supply of machinery parts. The appellant received a payment of ?58,02,925 for developing specified tools required for the order. The Revenue considered this amount as consideration for 'Business Auxiliary Services' due to the issuance of invoices to the foreign entity. The Commissioner (Appeals) upheld the demand for service tax, leading to the appellant appealing before the Tribunal.

The appellant argued that the invoice raised was for the development of tools used in their factory for manufacturing goods exported to General Electric Company USA. Citing a precedent, the appellant contended that even if an invoice is raised by a manufacturer for another unit and the goods are used within the factory, the benefit of a specific notification is applicable. The Revenue, represented by the learned A.R., supported the Order-in-Appeal.

After considering the submissions and the records, the Tribunal found no service element in the case. The amount received by the appellant was utilized for tool development within their factory premises. Consequently, the Tribunal concluded that there was no basis for levying service tax. As a result, the impugned order was set aside, and the appeal was allowed. The judgment was pronounced in court by the Tribunal members, Ms. Archana Wadhwa and Mr. Anil G. Shakkarwar.