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2023 (6) TMI 496 - AT - Service TaxClassification of services - Commercial or Industrial Construction Service or not - supply of Ready-mix Concrete (RMC) to their customers on the basis of Purchase Orders placed - HELD THAT - Purchase Order dated 29.12.2008 issued by Shapoorji Pallonji and Co. Ltd., has footnote in the bottom stating VAT extra at the rate of 4% against Form D-1, FOR at site basis. Pumping charges up to 5th floor at the rate of 85 per cum beyond Rs.25 per cum extra per floor ; Purchase Order dated 04.08.2008, issued by M/s G.S. Developers and Contractors Pvt. Limited, indicates that the prices is inclusive of pumping charges at the rate of 100 per M3. On going through the various purchase orders, the only indication that is available in the purchase orders is that the prices are inclusive of pumping charges. In some purchase orders, for example the supply order issued by Disney Farms Pvt. Limited dated 29.12.2008 indicates that the rate per cum are inclusive of service tax at the rate of 12.36%. However, there is no proof to the effect that the said service tax has been paid by the customer and collected by the appellant. However, this issue is not raised either in the show cause notice or in the OIO, which only proceed on the assumption that the appellants have rendered Commercial or Industrial Construction Service . The sale of RMC does not involve any service angle in spite of the fact that the appellants are pumping the RMC to the desired floor at the request of the customers. The activity of pumping RMC is incidental to the sale of RMC, on which requisite VAT has been paid, by the appellants, is incidental to the sale of RMC. It is further found that showing pumping charges separately in the work orders or invoices does not materially alter the situation - Option for installation is optional for the purchaser. For the reason that the dealer is charging installation charges, the dealer cannot be held to be a service provider. Therefore, the argument of Revenue that the activity of the appellant amounts to Commercial or Industrial Construction Service is incorrect. Judgment in the case of L T 2015 (8) TMI 749 - SUPREME COURT was rendered by the Hon ble Supreme Court in 2015, holding that indivisible services ought to be categorized under Works Contract only after 01.06.2007. Simply because the appellants categorized the service, which in fact is held to be a no service at all, under Business Auxiliary Service , does not take away the right of the appellant to classify the same under Works Contract Service . Moreover, the Department having sought to classify the activity under Commercial or Industrial Construction Service cannot alter their argument to the classification rendered by the appellants after 16.06.2008. In view of the Hon ble Apex Court judgment in the case of L T, the appellant s activity of sale and pumping of RMC would necessarily fall under Works Contract Service . However, there is no service rendered by the appellants in their business. The appeal is allowed.
Issues involved:
The issue involved in this case is whether the appellants rendered service under "Commercial or Industrial Construction Service" during the period in question. Details of the Judgment: Issue 1: Classification of Service Provided The appellants contended that their activity of supplying Ready-mix Concrete (RMC) and pumping it to desired floors does not fall under "Commercial or Industrial Construction Service" as per Section 65(25b) of the Finance Act, 1994. They argued that the primary contract was for the sale and delivery of RMC, with pumping being an incidental service. The Tribunal examined various purchase orders and found that the prices mentioned were inclusive of pumping charges, but there was no evidence of service tax being paid by customers. Relying on precedents like GMK Concrete Mixing Pvt. Ltd., the Tribunal concluded that the appellants' activity was a sales contract and not a service contract. Issue 2: Payment of VAT and Service Tax The appellants had paid Value Added Tax (VAT) on the transaction, including pumping charges until a certain date. They argued that once Sales Tax is paid, the same amount cannot be subjected to Service Tax again. Citing cases like Imagic Creative Pvt. Ltd. and Bharat Sanchar Nigam Ltd., the appellants contended that the VAT paid should exclude them from additional Service Tax liability. Issue 3: Categorization of Service under Works Contract The appellants claimed that even if their activity could be considered a service, it should be categorized under Works Contract Act and not Construction Services. They argued that services provided to Special Economic Zones (SEZ) are not taxable. The Tribunal referred to cases like Commissioner Of Service Tax Versus Lsg Sky Chef India (P.) Ltd. to support the argument that the appellants' activity did not qualify as a taxable service. Separate Judgment by the Tribunal: The Tribunal referred to cases like GMK Concrete Mixing Pvt. Limited and Vikram Reddy Mix Concrete Pvt. Limited, where it was held that the primary objective of the contract was the supply of RMC, not the provision of a taxable service. The Hon'ble Karnataka High Court in ACC Ltd. also emphasized that activities integral to manufacturing cannot be separately taxed as services. Conclusion: The Tribunal ruled in favor of the appellants, stating that the sale of RMC did not involve a service aspect, even though pumping was an incidental part of the transaction. It was likened to purchasing white goods with an optional installation service. The Tribunal rejected the Revenue's argument that the activity fell under "Commercial or Industrial Construction Service" and allowed the appeal, emphasizing that no service was rendered by the appellants. This judgment highlights the importance of understanding the nature of the contract and the primary objective of the transaction in determining the tax liability in cases involving the supply of goods and incidental services.
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