2020 (1) TMI 942 - AT - Service Tax

Classification of goods - fabrication of armoured vehicles - classification of services - activity of bullet proofing - Business Auxiliary Service or under works contract service? - demand of service tax on renting of immobile property service - benefit of N/N. 6/2006- CE dt. 1.3.2006. Classification of goods - fabrication armoured vehicles - HELD THAT - The appellant is fabricating the motor vehicles which are having been used for protection against AK-47, splinter proof protection, bullet proof glass, retaliation through holes made on the side, rear and on top of the vehicle. These features made them special purpose light armoured vehicles meant for use by the police and provide protection to the troops sitting inside the vehicles against bullets/hand grenades - similar issue decided in the case of M/S. JCBL LIMITED, M/S. TATA MOTORS LIMITED, M/S. JCL LIMITED VERSUS CCE ST, CHANDIGARH-II 2019 (4) TMI 176 - CESTAT CHANDIGARH where it was held that the main purpose is to ensure the safety of the occupants inside the vehicle for which, the vehicle is made bulletproof. Therefore, the bulletproof SPVs deserve to be classified under chapter heading 8705 - As the goods are classifiable under chapter heading 8705 90 00. Therefore, the appellants are entitled for the benefit under Serial No.50 of exemption N/N. 6/03-CE dt.1.3.2003 - thus, the appellant is manufacturing special purpose light armoured vehicle meant for use by troops and merit classification under Chapter heading 8705 90 00 and entitled for the benefit of exemption N/N. 6/2006-CE dt.1.3.2006 and no duty is payable by the appellant on the said activity. Classification of services - activity of bullet proofing - whether classifiable under works contract or business auxiliary service? - HELD THAT - It is fact on record that that the appellant is providing the said service along with material as material is used for bullet proofing on which the VAT has been paid by the appellant. In that circumstance, relying upon the decision of Hon ble Supreme Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT wherein the Apex Court has held that the services supplied along with material, the same merit classification under works contract service, therefore, the appellant has correctly classified the activity under works contract service. No service tax is payable under the business auxiliary service - Therefore, the demand is also set aside under the category of business auxiliary service. Renting of immovable property service - demand of service tax - HELD THAT - During the period from March and August, 2008, the service tax was payable on receipt basis. Admittedly, from the record, it is clear that the appellant has not received any amount on account of renting of immovable property, therefore, no service tax is payable by the appellant. Penalty - HELD THAT - The whole of the demand against the appellant is not sustainable and the same is set aside - Consequently, no penalty is imposable on the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Classification of fabrication of armored vehicles
2. Demand of service tax under Business Auxiliary Service or works contract service
3. Demand of service tax on renting of immovable property service

Detailed Analysis:

Issue 1: Classification of Fabrication of Armored Vehicles
The appellant was engaged in manufacturing bulletproof vehicles and claimed exemption under Notification No.6/2006-CE. The vehicles were designed for protection against AK-47, splinter proof protection, and bulletproof glass, primarily for police use. The appellant undertook bulletproofing activities on cars, treating it as works contract and paying VAT. The Revenue contended that the vehicles should be classified under Chapter heading 8710, denying the exemption. The Tribunal analyzed the features of the vehicles and held that they merit classification under Chapter heading 8705 90 00 as special purpose light armored vehicles, entitling the appellant to the exemption.

Issue 2: Demand of Service Tax
Regarding the demand of service tax, the appellant argued that the bulletproofing activity should be classified under works contract service, not Business Auxiliary Service, citing the decision of Larsen & Toubro Limited. The Tribunal agreed, stating that when services are provided along with materials, they merit classification under works contract service. Consequently, the demand under Business Auxiliary Service was set aside.

Issue 3: Demand of Service Tax on Renting of Immovable Property Service
The appellant was alleged to owe service tax on renting of immovable property service, but as per records, no remuneration was received during the relevant period. The Tribunal noted that service tax was payable on a receipt basis during that time, and since no remuneration was received, the appellant was not liable to pay service tax on renting of immovable property service. Therefore, the demand was deemed unsustainable, and no penalty was imposed on the appellant.

In conclusion, the Tribunal ruled in favor of the appellant on all issues, setting aside the demands and penalties. The appellant was found entitled to exemption under Notification No.6/2006-CE for the fabrication of armored vehicles, and the classification of bulletproofing activity under works contract service was upheld. The demand for service tax on renting of immovable property service was also dismissed due to the lack of remuneration received by the appellant.