2024 (3) TMI 340 - AT - Service Tax

Reverse charge mechanism - Liability of service tax - installation and commissioning provided by the supplier s technician at the place of the appellant - case of the department is that the appellant have received the service of Erection, Commissioning and Installation Service of the imported machinery and as per the Notification No.1/2006-ST dated 01.03.2006, 33% of the total value of import represent the service portion - suppression of facts or not - time limitation - HELD THAT - There is no dispute that there is composite contract for sale of machinery by a foreign supplier and total value represented the sale value of the machine even though it includes Erection, Commissioning and Installation Service. Therefore, the total value is a sale value and in case sale-purchase transaction, no service tax can be demanded. Moreover, it is also an admitted fact that the service was not provided by the supplier of machine whereas the Erection, Commissioning and Installation activity was carried out by the independent entity on behalf of M/s. Ashling Impex Pvt. Limited therefore, even if by imagination it is considered that the appellant have received Erection, Commissioning and Installation Service it is from Indian based Company. In such a case the ingredient for charging service tax under reverse charge mechanism in terms of Section 66A are not fulfilled. Accordingly, the service tax under reverse charge mechanism, under Section 66A and Rules thereunder, cannot be demanded. Extended period of limitation - suppression of facts or not - HELD THAT - There is no suppression of facts as the import of machine was made through Customs channel and customs duty was discharged at the total value, the objection was raised by the audit party from the record of the appellant, therefore there is no suppression of fact on the part of the appellant. The machine was imported in March 2012 whereas the show cause notice was issued invoking extended period on 29.01.2016 therefore, the entire demand is time-barred. The demand is not sustainable on merit as well as on limitation - Appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are the demand for service tax on Erection, Commissioning, and Installation Service of imported machinery and the applicability of the extended period for issuing a show cause notice.

Summary:

Issue 1 - Demand for service tax on Erection, Commissioning, and Installation Service:
The appellant imported machinery from Italia, including services for installation and commissioning. The department demanded service tax on the service portion as per Notification No.1/2006-ST. The appellant argued that the service was included in the sale value, and no service tax could be demanded. They also contended that the service was provided by an Indian company, not the overseas supplier, thus not fulfilling the criteria for levying service tax under reverse charge mechanism. The tribunal agreed with the appellant, stating that the total value represented the sale value, and no service tax was applicable. Additionally, as the service was provided by an Indian company, the requirements for charging service tax under reverse charge mechanism were not met. The tribunal found no suppression of facts and deemed the demand time-barred as the show cause notice was issued beyond the extended period.

Issue 2 - Applicability of the extended period for issuing a show cause notice:
The appellant argued that since the import of the machine was through Customs and duty was paid, there was no suppression of facts. The tribunal concurred, stating that the audit party raised objections from the appellant's records, indicating no suppression of facts. As the show cause notice was issued beyond the extended period, the tribunal deemed the entire demand time-barred.

The judgments cited by the appellant supported their case, leading the tribunal to set aside the impugned order and allow the appeal.

( Pronounced in the open court on 19. 02. 2024 )