2018 (11) TMI 966 - AT - Central Excise

Excisability/movability - manufacture of storage tanks - Held that - In this case the appellant is a fabricator of various kinds of tanks, reactors etc. and all works has been executed by the appellant at the site of the client and these tanks, reactors have been embedded to earth which becomes immovable property, therefore, all these tanks/reactors are not excisable as they cannot be removed as such. Admittedly, no finished goods has been fabricated by the appellant in their factory, in these circumstances, as the fabrication has done at site which become immovable property, therefore, no duty is payable by the appellant as the same is not excisable - demand set aside. Demand of service tax - erection and commissioning services or not - appellant has executed the work along with material - Held that - The appellant has executed the work along with material and the same has been admitted by the Revenue. In these circumstances, the activity merits classification made work under the category of works contract service - demand under the category of erection and commissioning is not sustainable - The appellant has not recovered any service tax from their client, accordingly no service tax has been retained by the appellant, therefore, is not payable by the appellant to the Department. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Excise duty demand confirmation with interest and penalties.
2. Service tax demand confirmation with interest and penalties.

Excise Duty Issue Analysis:
The appellant appealed against an order confirming excise duty demand of ?41,92,186 along with interest and penalties. The appellant is engaged in fabricating large tanks for various clients, and a show cause notice was issued proposing demand of excise duty. The adjudicating authority confirmed a demand of ?41,92,186 for tanks supplied to Indian Oil Corporation Ltd. and other parties. The appellant argued that since the tanks were fabricated at the client's site and embedded to earth, they are immovable and not excisable. The Tribunal agreed, setting aside the demand as the tanks were not excisable.

Service Tax Issue Analysis:
Regarding the service tax demand of ?25,87,406 along with interest and penalties, the appellant contended that the activity falls under "works contract service" as per a Supreme Court decision, and no service tax is payable under "erection and commissioning services." The Tribunal found that the appellant executed the work along with material, classifying it as "works contract service." The demand under "erection and commissioning services" was deemed unsustainable. The adjudicating authority claimed the appellant had realized service tax payable but not paid. However, the Tribunal found no evidence of the appellant recovering service tax from clients, thus setting aside the service tax demand. The impugned order demanding excise duty, service tax, and penalties was set aside, allowing the appeal with any consequential relief.

Conclusion:
The Tribunal ruled in favor of the appellant, setting aside the excise duty and service tax demands along with penalties. The decision highlighted the immovability of the fabricated tanks for excise duty purposes and classified the activity under "works contract service" for service tax, refuting the imposition under "erection and commissioning services." The Tribunal found no evidence of the appellant recovering service tax from clients, leading to the dismissal of the service tax demand.