2024 (9) TMI 1251 - AT - Service Tax

Taxability of erection, commissioning and installation activity of the machine - Inclusion of service charges within the sale value - HELD THAT - The appellant have manufactured and supplied the textile machines as per the contract and sale invoice issued to the customers. The appellant is supposed to undertake the supply and also the erection, commissioning and installation of the machine at the customer s site. The sale value includes all the elements and there is no separate consideration received by the appellant on account of the service related to erection, commissioning and installation. In such case there is no amount available for charging service tax. The issue has been considered by this Tribunal in the case of C.C.E S.T. -SILVASA VERSUS AALIDHRA TEXTOOL ENGINEERS PVT LTD 2022 (12) TMI 11 - CESTAT AHMEDABAD wherein this Tribunal has 'In such position the entire value of the goods has to be taken as sale value, consequently, no service value is involved separately. In the identical set of transaction, this tribunal has consistently taken a view that when there is a manufacturing and sale of the goods on a particular sale price which involves incidental service such as in the present case, no service tax can be demanded once the entire value is towards sale and has suffered the central excise duty.' From the above decision which has relied upon other decisions of the Tribunal, it is observed that the facts in the aforesaid decision and facts of the present case are identical. Therefore, the ratio of the above judgment is directly applicable. The demand in the present case is not sustainable. Accordingly the impugned order is upheld - appeal dismissed.

Summary

Issues Involved:
1. Taxability of erection, commissioning, and installation activities.
2. Inclusion of service charges within the sale value.
3. Classification of services post-01.06.2007 under works contract service.

Issue-wise Detailed Analysis:

1. Taxability of Erection, Commissioning, and Installation Activities:
The core issue revolves around whether the activities of erection, commissioning, and installation of machines provided by the appellant are taxable services. The Tribunal found that the appellant is primarily engaged in manufacturing and supplying textile machines, which include incidental services of erection, commissioning, and installation. It was noted that the sale value included all elements, and there was no separate consideration for these services. Therefore, no service tax could be charged on the erection, commissioning, and installation activities as they were part of the overall sale value and had already suffered central excise duty.

2. Inclusion of Service Charges within the Sale Value:
The Tribunal reiterated that the sale value of the machines included the cost of erection, commissioning, and installation. There was no bifurcation of the value between the sale of goods and the provision of services. Citing the precedent set in C.C.E. & S.T. Silvasa vs. Alidhara Textool Engineers Pvt. Ltd., the Tribunal held that when the entire transaction value is inclusive of incidental services and has suffered excise duty, no separate service tax is applicable. This principle was consistently upheld in various judgments, including M/s. Alidhara Texspin Engineers and M/s. Allengers Medical Systems Ltd.

3. Classification of Services Post-01.06.2007 under Works Contract Service:
The revenue argued that post-01.06.2007, the services should be classified and taxed under works contract service. However, the show cause notices had proposed the demand under erection, installation, and commissioning service. The Tribunal decided not to delve into the classification issue, as it had already determined that service tax was not payable on erection, installation, and commissioning services in the given facts of the case. The Tribunal emphasized that since the entire value had suffered excise duty, no service tax could be demanded.

Conclusion:
The Tribunal upheld the impugned order, dismissing the revenue's appeal. It reaffirmed that the entire value of the goods, which included incidental services, had already been subjected to excise duty, and hence, no service tax was applicable on the erection, commissioning, and installation activities. The Tribunal also did not address the classification issue under works contract service, as it was deemed unnecessary given the primary finding. The appeal filed by the revenue was dismissed, and the appellant was not liable to pay service tax on the given transaction.