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TMI Blog2024 (10) TMI 381X X X X Extracts X X X X X X X X Extracts X X X X ..... llant is under obligation to do the final assembling and erection, installation of the same machine at buyer s premises. The contract with the buyer is undisputedly for the sale of machine and no service involved. It is fact on record that the appellant are registered with Central Excise department, discharging excise duty and filing the periodical return. The appellant were not charging any amount towards service the total value of the goods and so called erection are billed for manufacture and sale of the machine. As regard the supply in piecemeal machine, the appellant have intimated to the department as per the Trade Notice No.MP/29/83 dated 23.03.83. It was also disclosed that since, the machines are supplied in piecemeal, the same will be assembled and erected at customer s site. Therefore, there is absolutely no suppression of fact with intent to evade the payment of duty. Accordingly, the extended period for demand was wrongly invoked. Hence, the demand for extended period is clearly time barred and the same is not sustainable apart from the merit of the case. The impugned orders are not sustainable. Hence, the same is set aside - Appeal allowed. - MR. RAMESH NAIR, MEMBER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Appellant will be clearing the machines in staggered manner and also undertook to pay entire duty on clearance of first part of the Machine from the factory. 1.4 In these circumstances, the Respondents issued a Show Cause Notice dated 29.02.2016 and 30.05.2017 demanding Service Tax of Rs.4,74,34,273/- and Rs.7,25,000/- respectively under the category of Erection, Commissioning and Installation Service , solely on the basis that some of the contracts/purchase orders for supplying Texturizing Machines were showing the price of Machine as inclusive of erection charges. The SCN dated 29.02.2016 invoked the extended period of limitation and the Show Cause Notice dated 30.05.2017 was for the subsequent normal period. Appellants denied the charges and replied to the said Notices and tendered documents in support of their contention. 1.5 The Show Cause Notice dated 29.02.2016 was adjudicated by the Commissioner C.Ex St. Daman vide his Order in Original No. DMN-EXCUS- 000-COM-002-17-18 dated 09.05.2017, Service Tax amounting to Rs. 4,74,34,273/- was confirmed. Likewise, SCN dated 30.05.2017 was adjudicated by the Superintendent and Appeal therein was decided by the Commissioner (Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rection charges is mentioned in the purchase order/ contract even then, the same were included for the purpose of demanding service tax. Therefore, the Adjudicating Authority has erred in demanding service tax on all the supplies whether the contract mentioned erection charges or otherwise. He submits that the reliance placed by the Adjudicating Authority on the judgment of the Kone Elevators 2014 (304) ELT 161 SC, is not at all applicable in the facts and circumstances of the present case. 2.2 He submits that in terms of Section 66B of the Finance Act, 1944, the service tax is leviable on the value of all services except for those specified in negative list. Therefore, for charging service tax, rendering of service for value is a must. It is undisputed position in the case at hand that no amount/ fees/ consideration was charged by the appellant for the alleged service rendered by them. Without prejudice to the above submission, even if the allegations are presumed to be true the same would apply only to those cases where the contract contemplates erection charges. The service tax demand cannot be made applicable in a blanket manner on all the consignments. He further submits that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioning. Therefore, the entire contract is a composite contract and accordingly, the same falls under the purview of service. Therefore, the demand was rightly confirmed by the adjudicating authority for which he prayed to uphold impugned order and dismiss the appeal. 4. We have carefully considered the submissions made by both the sides and perused the records. We find that there is no dispute in the facts that the appellant have manufactured and sold Draw Texturizing Machines and the same was cleared in part as it was not practically possible to transport the entire machine in one truck. When any machine or equipment cannot be cleared duly assembled in one truck, the department has prescribed the procedure under Trade Notice No.MP/29/83 dated 23.03.83 for removal of such machineries. The appellant have scrupulously followed such procedure and intimation to that effect was also given to the jurisdictional department of Central Excise vide a letter dated 08.09.2011. Since, the machinery could not be cleared in one truck and the same was cleared in piecemeal in different trucks. It is obvious that the appellant is under obligation to do the final assembling and erection, installatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l authority and who is not deemed as an employee before the commencement of this section. Explanation 2 . - For the purposes of this clause, the expression transaction in money or actionable claim shall not include (i) any activity relating to use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged; (ii) any activity carried out, for a consideration, in relation to, or for facilitation of, a transaction in money or actionable claim, including the activity carried out [(a) by a lottery distributor or selling agent on behalf of the State Government, in relation to promotion, marketing, organising, selling of lottery or facilitating in organising lottery of any kind, in any other manner, in accordance with the provisions of the Lotteries (Regulation) Act, 1998;]. (b) by a foreman of chit fund for conducting or organising a chit in any manner.;] Explanation 3. For the purposes of this Chapter, (a) an unincorporated association or a body of persons, as the case may be, and a member thereof shall be treated as distinct persons; (b) an establishment of a pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Rules brought into effect from 01.07.2000 and at Entry No.10 of the table appended to the said circular clarified as under:- 10. Should erection, installation and commissioning charges be included in the assessable value? If the final product is not excisable, the question of including these charges in the assessable value of the product does not arise. As for example, since a Steel Plant, as a whole, is an immovable property and therefore not excisable, no duty would be payable on the cost of erection, installation and commissioning of the steel plant. Similarly, if a machine is cleared from a factory on payment of appropriate duty and later on taken to the premises of the buyer for installation/erection and commissioning into an immovable property, no further duty would be payable. On the other hand if parts/components of a generator are brought to a site and the generator erected/installed and commissioned at the site then, the generator being an excisable commodity, the cost of erection, installation and commissioning charges would be included in its assessable value. In other words if the expenditure on erection, installation and commissioning has been incurred to bring in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Finance Act, 1994 :- (I) From 10-9-2004 to 15-6-2005 erection, commissioning or installation means any service provided by a commissioning and installation agency in relation to erection, commissioning or installation of plant, machinery or equipment; (II) From 16-6-2005 erection, commissioning or installation means any service provided by a commissioning and installation agency, in relation to, - (i) erection, Commissioning or installation of plant, machinery or equipment; or (ii) installation of - (a) electrical and electronic devises, including wirings or fittings therefore; or (b) plumbing, drain laying or other installations for transport of fluids; or (c) heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work; or (d) thermal insulation, sound insulation, fire proofing or water proofing; or (e) lift and escalator, fire escape staircases or travelators; or (f) such other similar services; (III) From 1-5-2006 erection, commissioning or installation means any service provided by a commissioning and installation agency, in relation to - (i) erection, commissioning or installation of plant, machinery, equipment or structures wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court further observed that the definition of manufacture as contained in Section 2(14) of the 1915 Act, is an inclusive definition which covers every process whether incidental or artificial by which the intoxicant is produced or prepared. By taking note of the precedent decisions, it was observed that the manufacture process dose not necessarily mean that it has to be excisable goods but would include any process which is incidental or ancillary to the completion of manufactured product. As such, the Hon ble High Court observed that the process of manufacture as defined under Section 2(14) of the 1915 Act falls within the ambit and sweep of the Section 2(f) (1) of Central Excise Act, 1944 and therefore, there can be no levy of service tax on the manufacturer in view of the clear postulate under Section 65(76b) of the Finance Act, 2005. Though the above judgment was given in the different facts and circumstances but we find that observations made by the Hon ble High Court fully covers the legal issue in the present case. 12 . Similarly in the case of CCE, Vapi v. Alidhara Textool Engineers Pvt. Limited - 2009 (14) S.T.R. 305 (T) = 2009 (239) E.L.T. 334 (Tri. - Ahmd.) it was obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove discussion, it is clear that the activity undertaken by the appellant is covered under Section 2(f) of Central Excise Act as manufacturing activity. Hence the appellants are not liable to pay the service tax on the activities undertaken by them. Hence the impugned order does not hold any merit on this issue. The same is set-aside and the appeal filed by M/s. Neo Structo Construction Limited is allowed. 14. Ratio of all the above decisions is to the effect 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. The decision of the Tribunal in the case of Lincoln Helios (India) Limited relied upon by the Commissioner in his impugned order laying to the contrary, cannot be followed inasmuch as the same stands rendered by a Single Member Bench in contradiction to the Divisional Bench judgment available in the case of Alle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at when the assessee was primarily and mainly engaged in the manufacture of textile machinery and the contract was entered by them with the customers for a lumpsum amount and the price was inclusive of installation and commissioning charges and when the assessee had paid central excise duty on the complete value and not claimed any deduction on account of installation/commissioning charges, the question of demanding service tax on ad hoc value of installation/commissioning charges was untenable in law. It was also held that the assessee was a manufacturer of excisable goods and was not an agency engaged in providing service of installation/commissioning. Further in the case of Allengers Medical Systems Ltd. (supra), it has been held by the Tribunal that where the assessee is paying Central Excise duty on manufacture and sale of goods on the total value recovered by them from customers, simply providing the service of erection/commissioning, which is a part of excisable goods, cannot be termed as provision of service and accordingly, levy of service on such activities cannot be sustained. In an identical case, in the matter of Alidhara Textool Engineers Pvt. Ltd. (supra), it has als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, 1994 which reads as under :- (54) works contract means a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of any movable or immovable property or for carrying out any other similar activity or a part thereof in relation to such property; 12 . From the above definition, it is clear that manufacturing activity of RMC cannot be covered under Works Contract by any stretch of imagination. Therefore, even though there is contract of Works Contract basically for the purpose of VAT Act, cannot be applied in the present transaction of manufacture and sale of goods in terms of Section 2(f) of Central Excise Act, 1944. The department has very much accepted the activity of the appellant as manufacturing and collected the excise duty on the entire value of RMC which includes the pumping and laying of RMC at site. Therefore, the department cannot take two stands, in one hand manufacturer for demanding excise duty and on the same activity, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, sand, etc., and in order to avoid hardening of the RMC after certain period of time due to exposure to moisture, chemicals are added to keep the RMC in a liquefied stature till its delivery to the customers depending upon the distance the vehicle carrying RMC is to reach the customer s place. If the RMC is hardened it becomes unusable. As is clear from the material on record, the assessee transports the RMC from the manufacturing place to the customer s site. Therefore, in the case of RMC, transportation charges invariably forms part of the sale consideration. After it reaches the site of the customer, the RMC is to be delivered to the customer. The choice of taking the delivery is given to the customer. He has the option of getting the entire RMC dumped at the site from the lorry or he has also been provided an option to get the RMC to a particular place such as roof top or any floor. Therefore, the RMC is delivered by pumping the RMC from the lorry to the specified place by the customer. All expenses incurred till the delivery constitutes sale price. In order to deliver the RMC at the specified place, if the assessee uses the pump, then the charges collected by the assessee f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal, is hereby confirmed. 13 . In view of the above judgments, it is clear that as per nature of product of RMC, every manufacturer who needs to supply RMC to the customer, apart from manufacturing, transportation, pumping and laying of concrete is inevitable for delivery of RMC. Therefore, all the activities, particularly when the value of such activities are integral part of the assessable value, which is determined in terms of Section 4 of Central Excise Act, 1944. The activities cannot be vivisected for the purpose of charging service tax on the same activity which is part and parcel of manufacturing activity. In view of this settled position, merely because the contract showing as Works Contract, the physical nature of transaction cannot be overlooked. 14 . As per above view, which is clearly supported by various judgments reproduced above, we are of the clear view that the activity of the appellant is predominantly of manufacture and sale of goods. Accordingly, the same cannot be charged with service tax under Works Contract service. 15 . The appellant have made alternate submissions about quantification of demand inasmuch as the impugned order confirmed the demand on the 60 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax shall be payable on sixty per cent. of the total amount charged for the works contract; 17 . From the above Rule, we find that firstly, in the facts of the present case, the value should be in terms of Rule 2A(i). Therefore even by any stretch of imagination Rule 2A(ii) is applicable, in such cases the value should be determined as per clause (A) of Rule 2A(ii). Accordingly, the value at the most should have been arrived at by allowing 60% abatement and only 40% of the gross value should be chargeable to service tax. Therefore, the calculation of service tax is incorrect. 18 . The appellant also made submissions on time-bar. We find that the appellant admittedly paid the excise duty on the entire transaction and this excise duty paid by the appellant was charged and collected by the Revenue. Therefore, the entire activity of manufacture, supply and manner of delivery of goods is very much on record. Accordingly, no suppression or misdeclaration can be attributed to the appellant for invoking extended period of demand. Accordingly, the demand for longer period in the show cause notice dated 3-5-2016 is not sustainable on the ground of limitation also. 19 . As per our above disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts are part of sale of excisable goods and Central Excise duty was paid thereon. There is no material placed by the Revenue that the appellants charged separately for erection and commissioning of equipments. In this context, the levy of service tax on such activity like erection, commissioning and installation is not proper and legal. The learned DR contended that the OBDI indicates contract for erection and installation of the medical equipments at the customer premises. We are unable to accept the contention of the learned DR. We are of the view that whether the activity is service or sale would be determined on the basis of examination of the contract between the parties and evidences. 6 . The Hon ble Supreme Court in the case of Kone Elevators (I) Pvt. Ltd. (supra) held that the substance and terms of contract, customs or trade and circumstances/facts of each case are to be looked into in this aspect. In the said case, the Hon ble Supreme court held that if the main object of contract is transfer of finished goods, it is contract of sale. If the main object is work and labour and property passing by accessories during the process of work to the movable property of customer, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 7 . In the present case, the appellants manufactured and hold the medical equipment. It is revealed from the record that the activity of installation, erection and commissioning are incidental to delivery of goods to the customers. Therefore, there is no reason for levy of service tax on the installation and commissioning of medical equipment. 8 . The learned DR relied upon the decisions of the Hon ble Supreme Court which are not applicable in the present case. (a) In the case of Moriroku UT India (P) Ltd. (supra), it has been held that liability under excise law is event based irrespective of whether the goods are sold or captively consumed. (b) In the case of N.M. Goel Co. (supra), it has been held that in order to be sale and levy of duty, not only the property in the goods should pass from the contractor to the Government, but they should be independent contract, separate and distinct, apart from mere passing of the property. (c) In the case of Imagic Creative Pvt. Ltd. (supra), the issue is whether the service provider paying service tax is liable to Sales Tax/VAT which are mutually exclusive. It has been held that having regard to the respective parameters on service tax an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices allegedly provided by them, no service tax can be confirmed. 10 . We, find that the Tribunal in the case of Allengers Medical Systems Ltd. v. CCE, Chandigarh reported in 2009 (14) S.T.R. 235 (Tri.-Del.) has observed that where a person sells the goods and erection, commissioning and installation of the said sold equipments is treated as a part of the sale of excisable goods and when there is no evidence to show charging of paid amounts for erection and commissioning, such activities have to be held as incidental to delivery of goods to the customers. Admittedly in the present case, the appellant has paid sales tax on the entire value of the goods sold by them and the invoice raised by them also reveals only the sale of goods. As already observed, in the purchase order also the reference is only to supply of goods and no part of the contract, requires the assessee to undertake the job of erection and commissioning, etc. No value of the said services stand separately mentioned in the purchase order. 11 . We also find favour in the assessee s contention that in terms of Notification No. 12/2003-S.T., the value of the goods has to be taken out for the purpose of arriving at the va ..... X X X X Extracts X X X X X X X X Extracts X X X X
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