2024 (12) TMI 1136 - AT - Service Tax

Liability to pay service tax on erection, commissioning, and installation charges included in the sale of Draw Texturising Machines - HELD THAT - Similar matter has already been decided by this tribunal in case of C.C.E S.T. -SILVASA VERSUS AALIDHRA TEXTOOL ENGINEERS PVT LTD 2022 (12) TMI 11 - CESTAT AHMEDABAD and therefore the matter is no longer res-integra - it was held by CESTAT that ' where an activity so Integrarely related and connected with the manufacturing activity and the purchase orders are for the complete plant ind machineries, duty commissioned, without showing any segregated amount recovered for erection and commissioning and where the entire contract value is taken as an assessable value for the purpose of payment of excise duty, no service tax is liable to be paid by the assessee.' Appeals of Revenue dismissed.

Issues Involved:

1. Whether the respondent assessee is liable to pay service tax on erection, commissioning, and installation charges included in the sale of 'Draw Texturising Machines.'
2. Whether the entire transaction value, inclusive of erection, commissioning, and installation charges, should be subjected to central excise duty.
3. Whether the service provided falls under the category of 'works contract service' post 01.06.2007.

Issue-wise Detailed Analysis:

1. Liability to Pay Service Tax on Erection, Commissioning, and Installation Charges:

The core issue was whether the respondent assessee should pay service tax on erection, commissioning, and installation services provided as part of the sale of 'Draw Texturising Machines.' The adjudicating authority found that the contract was a composite one for selling and supplying machines in a fully installed, commissioned, and operational condition. The processes undertaken at the customer's premises were incidental to the manufacturing activity. Since excise duty was paid on the entire contract value, including installation and commissioning, it was held that no separate service tax liability arose. The Tribunal upheld this view, referencing similar cases, such as Allengers Medical Systems Limited, where it was determined that activities incidental to the delivery of goods do not attract service tax when central excise duty is paid on the entire transaction value.

2. Inclusion of Erection, Commissioning, and Installation Charges in Central Excise Duty:

The Tribunal examined whether the entire transaction value, inclusive of erection, commissioning, and installation charges, should be subjected to central excise duty. It was reiterated that when the entire contract value is taken as assessable for excise duty purposes, no service tax is liable. The Tribunal cited precedents where the inclusion of such charges in the transaction value was considered part of the manufacturing process, thus exempting them from additional service tax. The Tribunal emphasized that the manufacturing unit was responsible for delivering a fully operational machine, and the incidental processes were part of the manufacturing activity.

3. Classification Under 'Works Contract Service' Post 01.06.2007:

The revenue argued that post 01.06.2007, the service should be classified and taxed under 'works contract service.' However, the show cause notices had proposed the demand under erection, installation, and commissioning services. The Tribunal did not delve into this classification issue, as it had already decided that service tax was not payable on the erection, installation, and commissioning services in the given facts where the entire value had suffered excise duty. The Tribunal upheld the adjudicating authority's decision and dismissed the revenue's appeal, reaffirming that the respondent was not liable to pay service tax on these services.

In conclusion, the Tribunal dismissed the appeals filed by the revenue, confirming that the respondent was not liable for service tax on erection, commissioning, and installation charges as these were part of the composite contract value subjected to central excise duty. The Tribunal's decision was consistent with previous judgments, reinforcing the principle that activities incidental to manufacturing and included in the excise duty-paid transaction value do not attract additional service tax.

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