2024 (10) TMI 381 - AT - Service Tax

Nature of activity - service or sale - service tax on erection, commissioning, and installation charges - extended period of limitation - HELD THAT - There is no dispute in the facts that the appellant have manufactured and sold Draw Texturizing Machines and the same was cleared in part as it was not practically possible to transport the entire machine in one truck. When any machine or equipment cannot be cleared duly assembled in one truck, the department has prescribed the procedure under Trade Notice No.MP/29/83 dated 23.03.83 for removal of such machineries. The appellant have scrupulously followed such procedure and intimation to that effect was also given to the jurisdictional department of Central Excise vide a letter dated 08.09.2011. Since, the machinery could not be cleared in one truck and the same was cleared in piecemeal in different trucks. It is obvious that the appellant is under obligation to do the final assembling and erection, installation of the same machine at buyer s premises. The contract with the buyer is undisputedly for the sale of machine and no service involved. It is fact on record that the appellant are registered with Central Excise department, discharging excise duty and filing the periodical return. The appellant were not charging any amount towards service the total value of the goods and so called erection are billed for manufacture and sale of the machine. As regard the supply in piecemeal machine, the appellant have intimated to the department as per the Trade Notice No.MP/29/83 dated 23.03.83. It was also disclosed that since, the machines are supplied in piecemeal, the same will be assembled and erected at customer s site. Therefore, there is absolutely no suppression of fact with intent to evade the payment of duty. Accordingly, the extended period for demand was wrongly invoked. Hence, the demand for extended period is clearly time barred and the same is not sustainable apart from the merit of the case. The impugned orders are not sustainable. Hence, the same is set aside - Appeal allowed.

Issues Involved:

1. Classification of the transaction as sale or service.
2. Applicability of service tax on erection, commissioning, and installation charges.
3. Invocation of the extended period of limitation.
4. Jurisdictional authority for service tax demand.
5. Inclusion of erection charges in the assessable value for excise duty.

Detailed Analysis:

1. Classification of the Transaction as Sale or Service:

The core issue was whether the transaction of supplying Draw Texturizing Machines, which included erection, commissioning, and installation activities, constituted a sale or a service. The appellants argued that the entire transaction was a sale of excisable goods, with the erection and installation being incidental to the sale. The tribunal found that the appellant's contract was primarily for the sale of machines, and no separate service was provided. The entire value of the machine was subject to excise duty, and no separate consideration for services was charged, aligning with the definition of 'service' under Section 65B(44) of the Finance Act, which excludes transactions of sale.

2. Applicability of Service Tax on Erection, Commissioning, and Installation Charges:

The appellants contended that no service tax was applicable as there was no separate charge for erection, commissioning, and installation, which were part of the sale process. The tribunal agreed, noting that the entire value, including any erection activities mentioned in some contracts, was treated as the sale of goods. The tribunal referenced several judgments, including Alidhara Texspin Engineers and Allengers Medical Systems Ltd., which supported the view that when no separate charges for erection are made, the activity is incidental to the sale of goods and not a service.

3. Invocation of the Extended Period of Limitation:

The tribunal examined whether the extended period of limitation was rightly invoked by the adjudicating authority. The appellants argued that they had disclosed all necessary information to the jurisdictional excise department, including the piecemeal clearance and subsequent assembly at the customer's site. The tribunal found no evidence of willful misstatement or suppression of facts by the appellants, concluding that the extended period of limitation was wrongly invoked, rendering the demand time-barred.

4. Jurisdictional Authority for Service Tax Demand:

The appellants argued that any service tax demand should be raised by the jurisdictional authorities where the alleged services were rendered, i.e., at the buyer's premises. The tribunal did not find it necessary to address this argument in detail, as the primary finding was that no service tax was applicable in the first place due to the nature of the transaction being a sale.

5. Inclusion of Erection Charges in the Assessable Value for Excise Duty:

The tribunal considered whether erection charges, if any, should be included in the assessable value for excise duty. It referred to CBEC Circular No. 643/34/2002-CX, which clarified that if any charges for erection and installation are incurred to bring into existence excisable goods, they should be included in the assessable value for excise duty. In this case, since no separate erection charges were levied, the entire transaction was subject to excise duty, and no additional service tax was applicable.

Conclusion:

The tribunal set aside the impugned orders, concluding that the entire transaction was a sale of excisable goods with no separate service element, and thus, no service tax was leviable. The invocation of the extended period of limitation was also found to be unjustified, and the demand was deemed time-barred. The appeals were allowed with consequential relief.

← Previous Next →