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TMI Blog2023 (6) TMI 1158X X X X Extracts X X X X X X X X Extracts X X X X ..... rection and commissioning activities. Hence, the allegation of the department that the Appellant has rendered 'Consulting Engineer' service is not supported by any evidence - the Appellant has appropriately paid service tax on the services rendered towards supervision of erection and commissioning of the plant. The value of bought out items sold to JUD on a profit cannot be considered as Consulting Engineer service for the purpose of demanding service tax. A composite contract cannot be bifurcated to artificially arrive at the service value - the demand in the impugned order is not sustainable - Since the demand itself is not sustainable, the question of demanding interest and imposing penalty does not arise. Appeal allowed. - Service Tax Appeal No. 243 of 2012 - FINAL ORDER NO. 75814/2023 - Dated:- 23-6-2023 - HON BLE SHRI P. K. CHOUDHARY , MEMBER ( JUDICIAL ) And HON BLE SHRI K. ANPAZHAKAN, MEMBER ( TECHNICAL ) Shri S. Narayanan , Advocate for the Appellant ( s ) Shri S. S.Chattopadhyay , Authorized Representative for the Revenue ORDER Per : K. ANPAZHAKAN : The Appellant (M/s.Walchandnagar Industries Ltd - WIL in short) was engag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 137172000 6 Clinker Transport, storage and handling Included in Sl.No. (A5) 7 Clinker Grinding + fly ash feeding 67600000 8 Clinder Storage silo 9939000 9 Packing Section 12220000 10 Coal handling, coal Grinding Metering 43235000 11 Water Treatment system (without chlorination plant) 1140000 12 Compressors 6091000 Sub Total (A-Mechanical portion) 410222000 B Electrical Instrumentation Prices 1 Electricals 115400000 2 Electric cable cable trays By customer 3 Instrument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of Central Excise duty by M/s. WIL. b) M/s. WIL as Service Provider: M/s. WIL has received an amount of Rs.52,08,55,249/- from JUD by issuance of commercial invoices, where the machinery and equipments were manufactured by other manufacturers. 7. The Appellant stated that the department has taken the entire value of Rs.52,08,55,249/- as value meant for providing Consulting Engineer s service, after excluding the value of Rs.13,68,01,000/- towards their own manufactured goods from the gross receipt of Rs.65,76,56,249/-. They have not taken into account the bought out items supplied by the Appellant. Accordingly, the Appellant contended that the demand made in the Notice is not sustainable. 8. The Ld DR reiterated the findings of the adjudicating authority in the impugned order. He stated that the Appellant has claimed value addition of more than 20 per cent over manufacturer s value on the bought out items supplied. They have not assigned any value for the service portion from the gross amount received. Accordingly, they contended that the demand made in the impugned order is sustainable. 9. Heard both sides and perused the appeal records. 10. The issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and commissioning of the plant as per para 2.3 of the Agreement. Performance guarantee of the machineries were provided by the Appellant. Engineering service and engineering documents such as drawings, technical data were provided by them as per para 2.8 of the Agreement. Erection manual and operation procedures for the equipments were provided by them as per para 2.10 and 2.11 of the Agreement. Project guarantee was also provided by them. However, no value has been assigned for all these services. Hence, part of the gross receipt has been assigned for these services and service tax was demanded. 14. The Appellant stated that as far as technical assistance and drawings mentioned in paras 2.7, 2.9 and 2.10 of the contract is concerned, they have nothing to do with the design, manufacture and supply of the goods supplied by them. Furnishing and getting approval of drawings for manufactured and bought out goods is a routine procedure when supply of goods for setting up of the plant is sought by the buyer from the seller. The drawings are relevant only for the person manufacturing the goods. The sale price of the goods supplied always include the cost of the drawings and designs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19. The Appellant explained the reason for the difference in value given in the original invoices at the time of purchase of the goods and the value realized for the goods from JUD after its sale, as below: Basic value of the bought out items - 28.91 Cr Taxes paid on the goods procured - 6.69 Cr Freight cost - 6.27 Cr Over Heads (11%) - 3.18 Cr Interest carrying cost on retention money - 1 Cr Interest for outstanding from JUD - 3 Cr Total - 49.05 Cr As per the above work sheet, the Appellant stated that the profit margin was only in the range of 7.5% to 10% and not 20% as alleged by the department. In any case, the profit margin on traded goods cannot be considered as cost of provision of service, to demand service tax on it. 20. We observe that, the Appellant is not a consulting engineer firm. They are a manufacturing firm and whenever physical execution of erection and commissioning is sought along with supply of their own manufactured goods, they assist the buyer in procurement of bought out items. In the present case, JUD themselves undertook the erection and commissioning activity. Apart from the Appellant they have engaged va ..... X X X X Extracts X X X X X X X X Extracts X X X X
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