Custom, Excise & Service Tax Tribunal
Anrique Morbonite Pvt Limited vs Rajkot on 3 June, 2019
Customs, Excise & Service Tax Appellate Tribunal,
West Zonal Bench : Ahmedabad, 380004
REGIONAL BENCH- COURT NO. 3
Service Tax Appeal No. 78 of 2011
(Arising out of OIA-482/2010/COMMR-A-/CMC/RAJ dated 29/10/2010 passed by
Commissioner of Central Excise-RAJKOT)
Antique Morbonite Pvt. Ltd. Appellant
Lakhdhirpur Road,
National Haighway No. 8-a,
MORBI,
GUJARAT.
-VERSUS-
C.C.E. & S.T.-Bhavnagar Respondent
Central Excise Bhavan, Race Course Ring Road...Income Tax Office, Rajkot, Gujarat, 360001 Appearance:
For the Appellant : Ms. Jigar Shah, Adv
For the Respondent : Shri T.K. Sikdar, Asst. Commr. (AR)
CORAM:
HON'BLE MEMBER (JUDICIAL) , MR. RAMESH NAIR
HON'BLE MEMBER (TECHNICAL), MR. RAJU
FINAL ORDER NO.A/ 10961 /2019
Date of Hearing: 13.05.2019
Date of Decision:03.06.2019
RAMESH NAIR
Brief facts of the case are that the appellant were engaged in the manufacture of tiles, falling under chapter 69 of the Central Excise Tariff Act at their factory situated at Morbi, District Rajkot, Gujarat. The appellants have carried out major expansion programme in their manufacturing capacity during the period Aug 2006 to Jan 2007. For the said purpose, the appellant decided to import certain machinery from various suppliers situated at China, Hongkong, and European countries. The suppliers of these machineries (situated abroad) provided the Erection, Commissioning and Installation Services to the appellant free of cost. In other words, the suppliers of the machineries were required to carry out Erection, Commissioning and Installation of the machineries and the appellant need not to pay anything for the said work. The appellants have paid basic customs duty, CVD and SAD as may be applicable on such imports of goods on the entire value 2 ST/78/2010 mentioned in the agreement. The appellants have availed the CENVAT Credit on CVD paid on such goods. During the course of audit, it was observed that the appellants have availed the services in the nature of Erection, Commissioning and Installation Services from Foreign Service provider (suppliers of machineries). Therefore, the appellants are liable to pay Service Tax. The above audit objection was culminated into issuance of Show Cause Notice dated 08/07/2008. On adjudication, Addl. Commissioner confirmed the demand of Service Tax of Rs. 35,33,506/- along with interest and penalties. The appellant preferred an appeal before Ld. Commissioner of Central Excise (Appeals), Rajkot on various grounds. The Ld. Commissioner (Appeals) upheld the demand of Service Tax as was confirmed by the Addl. Commissioner. Therefore, the present appeal.
2. Shri Jigar Shah, Ld. Counsel appearing on behalf of the appellant submits that both the lower authorities have confirmed that the activity carried out by the alleged service provider are in the nature of composite work i.e. 'Works Contract'. It is settled that prior to 01.06.2007, service of 'Works Contract' was not taxable as held by Hon'ble Supreme Court in the case of Larson &Toubro Ltd. 2015 (39) STR 913 (SC). He submits that the demand pertains to the period Aug 2006- Jan 2007 and as per the Hon'ble Supreme Court judgment for the period prior to 01/06/2007, the 'Works Contract' cannot be liable to Service Tax. He also placed reliance on Hon'ble Madras High Court judgment in the case of Richardson & Cruddas 1964 SCC Online Mad 401 and the same was affirmed by the Hon'ble Supreme Court vide 1968 (21) STC 245. He submits that as per the above settled position even if department contention is accepted that the activity of the appellant is of 'Works Contract', the same is not taxable. He further submits that it is undisputed that in the present case, the suppliers of imports have not charged any consideration for the alleged Erection, Commissioning and Installation Services. These facts have been accepted by both the lower authorities. He submits that in when there is no consideration, then demand of Service Tax is not sustainable. In this regard, he relied upon the judgments of Bhayana Builders 2018 (10) GSTL 118 (SC) and Intercontinental Consultant 2018 (10) GSTL 401 (SC). He submits that Rule 7 of the Service Tax (Determination of Value) Rules, 2006, it was specified that in case of imports of services actual consideration charged by the service provider, is alone taxable. So, therefore, since no actual consideration was charged by the alleged service provider, no Service Tax is payable on the nil amount. He, therefore, submits that both the lower authorities have travelled beyond the scope of the Show Cause Notice in as much as though the Show Cause Notice did not invoke the provision of section 66A of the Finance Act, 1994, the demand was confirmed on the appellant considering under reverse charge mechanism which is 3 ST/78/2010 only possible if section 66A is invoked. He placed reliance on the following judgments:
(1) Reliance Ports & terminals 2016 (334) ELT 630 (Guj.) (2) Commissioner V Ballarpur Industries Ltd. 2007 (215) ELT 489 (S.C) (3) Commissioner Vs. Gas Authority of India Ltd. 2008 (232) ELT 7 (S.C.) He further submits that the entire value which was taken for demanding the Service Tax suffered the custom duty. Therefore, it is a case of import of machinery and no service is involved. On the entire value of import on which the Custom duty was paid cannot be again taxed with Service Tax. He placed reliance on the following judgment:
(1) Allengers Medicals System Ltd. Vs. CCE 2009 (14) STR 235 (2) Alidhara Texspin Engineers Vs. Commr. of C.Ex. & Customs, Vapi 200 (20) S.T.R. 315 (3) Siemens Building Technologies 2018-TIOL-2351-CESTAT-MAD (4) United Shippers Ltd. 2015 (37) STR 1043 (Tri-Mum.) (5) United Shippers Ltd. 2015 (39) STR J369 (SC) He also submits that demand was confirmed by invoking Notification no. 01/2006-
ST dated 01/03/2006. Since the notification 01/2006-ST being conditional, cannot be thrusted upon the assessee, demand cannot be sustained. He submits that there is no parallel provision of section which is comparable with section 5A(1A) of the Central Excise Act, 1944. He submits that as per notification 01/2006-ST, the benefit of the notification is not available if the assessee avails the CENVAT Credit. In the present case, the appellant have undisputedly availed the CENVAT Credit. For this reason also demand of Service Tax was forcefully confirmed under notification 01/2006-ST dated 01/03/2006 is not sustainable. In this regard, he placed reliance on the judgments of this Tribunal in the case of Deloitte Haskins & Sells 2015 (38) STR 1220 (Tri-Mum.).
He further submits that if at all appellants, are required to pay Service Tax on such alleged Erection, Commissioning and Installation Services, then the same is available as a CENVAT Credit to the appellant themselves as they are engaged in the manufacture of Excisable goods and discharging the excise duty. In this case, the entire exercise is of demand of Service Tax, payment thereof, availment of CENVAT Credit, utilization thereof payment of Excise duty, will amount to Revenue neutral. For this reason also, demand is not sustainable. In support of this submission, he placed reliance on the following judgments:
(1) Jet Airways 2016 (44) STR 465 (Tri- Mum)
(2) Jet Airways 2017 (7) GSTL J35(SC)
4 ST/78/2010
He further submits that both the lower authorities have imposed penalties under section 76, 77 & 78. Penalty under 76 and 78 cannot be imposed simultaneously as held in the case of Raval Trading Company 2016 (42) STR 210 (Guj)
3. Shri T.K. Sikdar, Ld. Asst. Commissioner(AR), appearing on behalf of the Respondent reiterated the findings of the impugned order.
4. We have carefully considered the submission made by both the sides and perused the records. We find that before deciding the issue that whether the appellant are actually liable for Service Tax under Erection, Commissioning and Installation Services for the services provided by the suppliers of the machineries situated abroad. We find that both the lower authorities have concurrently held that the services of Erection, Commissioning and Installation is a composite contract of works contract. Even though if it is accepted the contention of both the lower authorities, then there is no dispute by the Revenue that the service falls under the Works Contract. The period involved is August, 2006- January 2007. During this period the Works Contract Service was not liable to payment of Service tax as held by Hon'ble Supreme Court in the case of L&T ltd. (supra). Therefore, for this reason itself, the demand is not sustainable. Since on this ground itself the matter can be disposed of, we are not going into the various other issues raised by the appellant. Accordingly, the impugned matter is set aside and appeal is allowed.
(Pronounced in the open court on 03.06.2019 ) (Ramesh Nair) Member (Judicial) (Raju) Member (Technical) Diksha