2023 (12) TMI 1007 - AT - Service Tax

Classification of services - technical inspection and certification service - activity of X-Ray of pipeline - HELD THAT - As per the definition of inspection and certification service, apart from inspection, certification is also required whereas in the present case there is no certification found on record therefore on that basis the activity of X-Ray on the material cannot be classified as inspection and certification charges - the submission of the learned Counsel is also convincing that since the service was provided along with material it is classifiable as works contract service. The service is similar to the photography service and in M/S. JAIN BROTHERS M/S. PUNJAB COLOUR LAB. VERSUS CCE, BHOPAL 2008 (11) TMI 58 - CESTAT, NEW DELHI and COMMISSIONER OF CENTRAL EXCISE, RAIPUR VERSUS AJANTA COLOR LABS 2008 (12) TMI 135 - CESTAT NEW DELHI in case of photography, since it is provided along with material. It was held that the service is qualified as works contract service - Applying the ratio of the said judgment, we are of the view that the service in the present case is qualified as works contract service, for this reason also the demand under wrong head i.e inspection and certification service will not be sustainable. The demand in the present case is not sustainable on multiple counts - the impugned order is set aside - Appeal allowed.

Summary

Issues Involved:
The issue involved in the present case is whether the X-Ray activity of pipeline falls under technical inspection and certification service and is liable to Service Tax.

Judgment Details:

Issue 1: Classification of X-Ray activity under Service Tax
The appellant argued that since X-Ray service was provided along with material (X-Ray films), it should be classified under works contract service, not technical inspection and certification service. The appellant compared X-Ray service to photography service, which was classified as works contract service in previous judgments. The Tribunal agreed, stating that without certification, the X-Ray activity cannot be classified as inspection and certification service. The Tribunal found the service to be similar to photography service, thus qualifying as works contract service. Consequently, the demand under the incorrect head of inspection and certification service was deemed unsustainable.

Issue 2: Validity of Show Cause Notice (SCN) and Order-in-Original (OIO)
The appellant contended that the SCN and OIO were inconsistent with the provisions of Section 73 of the Finance Act 1994, as they were issued to a partnership firm by combining the business of a proprietorship concern with separate Service Tax registrations. Citing relevant judgments, the appellant argued that the SCN was void ab initio and should be quashed. Additionally, the appellant argued that the demand for Service Tax was without legal authority, as tax should be payable on a receipt basis, not accrual basis. The demand was based on a closing balance of debtors that had not been received, making the Service Tax demand invalid.

Conclusion:
The Tribunal found in favor of the appellant on both issues. The demand was deemed unsustainable on multiple grounds, including the misclassification of the X-Ray activity and the invalidity of the SCN and OIO. Consequently, the impugned order was set aside, and the appeal was allowed.

(Separate Judgment delivered by HON'BLE MEMBER (JUDICIAL) RAMESH NAIR)