2023 (9) TMI 721 - AT - Service Tax

Classification of services - Technical Testing and Analysis Services or not - appellant was engaged by their customers for the purpose of testing and analyzing the quality and fitness of the welded areas on the joints of the products fabricated before such manufactured / fabricated items are sold or taken for further use in manufacture / fabrication activity - HELD THAT - The main activities carried out by the appellant is PWHT and stress relieving treatments. Though he has used the word testing, it is now argued by the Ld. counsel that the activity under taken by the appellant is not technical testing and is only part of manufacturing activity. The word testing‟ is used by him in an unprofessional sense. The work orders do not show that the appellant has been entrusted with the job of technical testing. Instead, the job description says localised PWHT of piping product‟ - activity under taken by the appellant as per the above work order does not indicate any activity of technical testing. It is in the nature of heat treatment, stress relief treatment, etc. For an activity to fall under technical testing, some process so as to test the quality, strength, toughness, etc., has to be done. From the literature available in website, it cannot be concluded that the activity under taken by the appellant falls within the definition of technical testing and analysis services‟. Further, in the present case, it is not seen that the appellant has issued any certificate with regard to the testing done. From the statement given by Shri C. Manikanteswaran, it is inferred that while doing the heat treatment, the temperature at which the material is subjected to heating is recorded. It is prepared in a chart form and given the customer. Thus, the temperature chart provided by the appellant is considered to be the test report by the Department - there are no material throwing light with regard to a certificate issued by the appellant as to the technical nature/ quality of a product - the issue therefore requires re-consideration. This is a fit case for remand to the adjudicating authority who is directed to consider all issues afresh - appeal allowed by way of remand.

Summary

Issues Involved:
1. Whether the appellant's activities fall under the definition of "Technical Testing and Analysis Services."
2. Valuation of service charges, including the inclusion of reimbursable expenses.
3. Eligibility for cum-tax benefit.

Summary:

1. Definition of "Technical Testing and Analysis Services":
The primary issue is whether the appellant's activities qualify as "Technical Testing and Analysis Services" under Section 65(105)(zzn) of the Finance Act, 1944. The appellant argued that their work, which involves Postweld Heat Treatment (PWHT) and stress relieving treatments, does not fall under this category. They contended that their activities are part of the manufacturing process and do not involve issuing any certificates certifying the quality of goods. The Tribunal noted that the appellant's activities, as described in work orders and invoices, do not indicate technical testing but rather heat treatment and stress relief. The Tribunal found that the Department's reliance on the appellant's use of the word "testing" in an unprofessional sense was insufficient to classify their activities under "Technical Testing and Analysis Services."

2. Valuation of Service Charges:
The appellant contended that the valuation of service charges was incorrect as it included reimbursable expenses such as transportation costs. The Tribunal acknowledged that if the amounts collected included actual reimbursements, such expenses should not be included in the taxable value, citing the Supreme Court decision in Union of India Vs. Intercontinental Consultants and Technocrats Pvt. Ltd. The Tribunal directed the adjudicating authority to re-examine whether the taxable value quantified by the Department included reimbursable expenses.

3. Cum-Tax Benefit:
The appellant argued that they were eligible for cum-tax benefit as they had not collected Service Tax prior to obtaining Service Tax registration on 27.02.2012. The original authority had allowed this benefit, but the Commissioner (Appeals) had set it aside. The Tribunal noted that the work orders prior to the appellant's registration did not indicate the collection of Service Tax and directed the adjudicating authority to re-examine this issue.

Conclusion:
The Tribunal found that the case required re-consideration on all issues and remanded the matter to the adjudicating authority for fresh consideration. The impugned order was set aside, and the matter was remanded to the adjudicating authority, leaving all issues open for re-examination.