2019 (8) TMI 826 - AT - Service Tax

Levy of service tax - Erection, Commissioning and Installation Service - job-work also done for principal manufacturer - amount earned for job-work was treated as consideration for providing Erection, Commissioning and Installation Service - HELD THAT - The appellants were engaged in the manufacture of engineering goods and they were receiving job for job work on Central Excise Job work Challans and after the job was done the manufactured goods were returned to the principal manufacturer on the basis of said job work challan and whenever the jobs were so heavy that the job cannot be sent to the manufacturing unit, the appellant used to complete the job at site. In the said statement Proprietor of the appellant has clearly mentioned that since the manufacturing activity was being done by the appellant for principal when the inputs were received by the appellant on job-work challan, there was no question of payment of excise duty by the appellant. When such information was available with revenue that the appellant is doing job work on job work challan in their factory, to treat entire transaction to be consideration for providing Erection, Commissioning Installation Service is not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the demand of service tax raised against the appellant is sustainable based on the investigation initiated by the revenue department?
2. Whether the show cause notice issued to the appellant excluded consideration for sale and manufacture, making it unsustainable?
3. Whether the valuation aspect and re-quantification of demand were appropriately considered by the Commissioner (Appeals)?
4. Whether the appellant's engagement in job work on Central Excise Job work Challans justifies the treatment of the entire turnover as consideration for providing Erection, Commissioning & Installation Service?
5. Whether the appellant is entitled to relief based on the findings of the Tribunal?

Analysis:
1. The investigation initiated by the revenue department led to the demand of service tax against the appellant based on a statement recorded from the appellant's Proprietor. The demand was raised for the period from April 2011 to March 2015, totaling around ?18 lakhs. The Original Adjudicating Authority confirmed the demand, leading to an appeal before the Commissioner (Appeals) and subsequently to the Tribunal.

2. The appellant argued that the show cause notice did not exclude consideration for sale and manufacture, making it unsustainable. The appellant contended that the entire turnover was not solely for providing Erection, Commissioning & Installation Service, as presumed by the revenue department. The Tribunal noted discrepancies in the notice and the appellant's activities, questioning the sustainability of the demand.

3. The Commissioner (Appeals) did not find any infirmity in the appellant's plea for re-quantification of the demand. However, the Tribunal reviewed the valuation aspect and found that the appellant's engagement in job work on Central Excise Job work Challans was not appropriately considered, leading to the decision to set aside the impugned order and allow the appeal.

4. The Tribunal highlighted that the appellant's engagement in manufacturing engineering goods and job work on Central Excise Job work Challans indicated that the entire turnover should not be treated as consideration for providing Erection, Commissioning & Installation Service. The Tribunal found that the revenue's treatment of the transaction was not sustainable, leading to the decision to allow the appeal.

5. In conclusion, the Tribunal set aside the impugned order, allowing the appeal and entitling the appellant to consequential relief as per law. The decision was made based on the findings that the entire proceedings were vitiated due to the incorrect treatment of the appellant's transactions.