2010 (2) TMI 195 - AT - Service Tax

Consulting engineering service - The agreement was for supply of imported designs and drawings, provision of foreign technician s services for supervision of detailed engineering in India, manufacture of indigenous equipment, erection, start-up, commissioning, demonstration of performance guarantee tests and training at supplier s works for Skin Pass Mill(SPM) for Cold Rolling Mill project - The contention is that as the Customs Authorities treated the import of designs and drawings as goods therefore the value of these cannot be taken into consideration for the purpose of Service Tax. Similar argument is made in respect of the drawings and designs originating in India as the drawings and designs are goods as per the provisions of Central Excise Tariff and classifiable under chapter 49 of the Tariff. In respect of commissioning and erection services the contention is that the commissioning and erection services come under the scope of Service Tax w.e.f. 01.07.2003 and the present period is from April, 1999 to November, 2001 therefore the demand of Service Tax in respect of erection and commissioning is not sustainable. Held that - as the designs and drawings which are part of the contract are treated as goods by the Customs Authorities and were assessed under the Customs Act therefore the finding that the same are service is not sustainable matter remanded back for de novo consideration.

Summary

Issues:
1. Whether the demand of Service Tax on the Appellant was correctly confirmed along with penalties for providing consulting engineering service.
2. Whether the value of imported designs and drawings should be considered for calculating service tax.
3. Whether commissioning and erection services fall under the scope of Service Tax for the relevant period.
4. Whether the impugned order confirming the demand of Service Tax and penalties is sustainable.

Analysis:

Issue 1:
The Appellant contested the demand of Service Tax and penalties imposed for being treated as a provider of consulting engineering service. The Appellant argued that the contract with M/s. Tata Iron & Steel Co. Ltd. involved various services beyond consulting engineering, such as supervision, manufacture, erection, and commissioning. The Appellant emphasized that the value of imported designs and drawings, which were treated as goods by Customs Authorities, should not be included in the service tax calculation. The Tribunal found merit in the Appellant's argument and set aside the impugned order, remanding the matter for fresh adjudication.

Issue 2:
The primary contention revolved around whether the value of imported designs and drawings should be considered for assessing service tax. The Appellant relied on the treatment of designs and drawings as goods by Customs Authorities during import, arguing that such items should not be categorized as services for service tax purposes. The Tribunal agreed with the Appellant, emphasizing that since the designs and drawings were treated as goods under the Customs Act, considering them as services for service tax was not sustainable. The matter was remanded for re-evaluation by the adjudicating authority.

Issue 3:
Regarding commissioning and erection services, the Appellant argued that these services should not be subject to Service Tax for the relevant period, citing the applicability of Service Tax from July 2003 onwards. The Tribunal acknowledged this argument and directed the adjudicating authority to reconsider all issues, including the applicability of Service Tax to commissioning and erection services, during the fresh adjudication process.

Issue 4:
The Revenue contended that the supply of designs and drawings constituted consulting engineering services liable for Service Tax. However, the Tribunal noted that the Customs Authorities had treated the designs and drawings as goods during import, leading to a discrepancy in their classification for service tax purposes. The Tribunal set aside the impugned order, emphasizing the need for re-evaluation by the adjudicating authority and allowing both parties to present evidence in support of their claims.

In conclusion, the Tribunal found in favor of the Appellant on the issues related to the classification of imported designs and drawings for service tax calculation and directed a fresh adjudication to address all concerns raised by both parties comprehensively.