2007 (11) TMI 162 - AT - Service Tax

Erection Commissioning and Installation of A.C. - appellants actually executed Works Contract on turnkey basis which cannot be vivisected sale & service - appellants had paid tax by excluding from the total gross amount received by them the amount attributable to the cost of the materials goods - demand of Service Tax on the entire amount received under the contract is not at all justified - even the State Government authorities have registered the contract as Works Contract

Summary

Issues:
1. Improper determination of value of taxable services.
2. Evasion of Service Tax.
3. Demand of interest and penalty.
4. Challenge to the impugned order.
5. Works Contract execution.
6. Liability to pay Service Tax.
7. Exemption Notification 12/2003-S.T.
8. Dispute over computation of value for Service Tax.
9. Justification for demanding duty on entire gross receipt.

Analysis:

1. The appeal was filed against an Order-in-Original passed by the Commissioner of Central Excise, Hyderabad-II Commissionerate, alleging improper determination of the value of taxable services, leading to evasion of Service Tax. The Adjudicating Authority confirmed a substantial demand towards Service Tax, Education Cess, interest, and penalties, which the appellants contested vehemently.

2. The appellants contended that they executed Works Contract on a turnkey basis, citing precedents to support their position. They argued that Works Contract cannot be vivisected, and they became liable to Service Tax only from 2007 onwards, thus claiming exemption from paying Service Tax for the period in question.

3. The Revenue, represented by the learned SDR, asserted that the appellants were liable to pay Service Tax on the services provided, particularly Installation, Commissioning, and Erection of Air Conditioning Plants. They argued that the appellants had incorrectly calculated the value of services, availed exemptions without fulfilling conditions, and failed to provide documentary proof for excluding material costs.

4. After hearing both sides, the Tribunal carefully considered the issue and found that the appellants had already discharged duty liability on the portion of the gross amount attributable to services rendered. The Revenue disputed the computation of the value, demanding duty on the entire contract value. However, the Tribunal noted that a significant percentage of the contract value was for goods supplied, justifying the appellants' position.

5. The Tribunal highlighted that the appellants' Works Contract status was undisputed, even registered as such by State Government authorities. Referring to previous favorable decisions and legal precedents, including Final Order No. 1727/2006, the Tribunal ruled in favor of the appellants. They emphasized the need to follow established ratios and set aside the impugned order, allowing the appeal with consequential relief.

6. In conclusion, the Tribunal found no justification for demanding duty on the entire gross receipt, ultimately ruling in favor of the appellants based on legal principles and precedents cited during the proceedings.