Custom, Excise & Service Tax Tribunal
) Success Retreading (India) P. Ltd vs Commissioner Of Central Excise on 23 June, 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH
CHENNAI
Appeal Nos.ST/S/40927-40929/2014 &
ST/40695-40697/2014
[Arising out of Order-in-Appeal No.16/2014-ST, 17/2014-ST & 18/2014-ST all dt. 16.1.2014 passed by the Commissioner of Central Excise (Appeals), Salem]
For approval and signature :
Honble Shri P.K. Das, Judicial Member
Honble Shri R. Periasami, Technical Member
1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? :
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not ? :
3. Whether the Members wish to see the fair copy of
the order? :
4. Whether Order is to be circulated to the Departmental authorities ? :
1) Success Retreading (India) P. Ltd.
2) Safety Retreading Company Pvt. Ltd.
3) Quality Retreading Company Appellant
Versus
Commissioner of Central Excise,
Salem Respondent
Appearance:
Shri M.N. Bharathi, Advocate For the Appellant Shri K.P. Muralidharan, Supdt. (AR) For the Respondent CORAM : Honble Shri P.K. Das, Judicial Member Honble Shri R. Periasami, Technical Member Date of Hearing : 23-06-2014 Date of Decision : 23-06-2014 FINAL ORDER No.40451-40453/2014 Per P.K. Das
1. Common issue is involved in these applications and therefore they are taken up together for disposal.
2. After hearing these applications at length, we find that appeals may be decided at the stage of stay petition hearing. Accordingly, after disposing the stay applications, we take up the appeals for hearing.
3. After hearing both sides and on perusal of records, we find that appellants are engaged in the business of retreading of old and used tyres. There is a demand of service tax along with interest and penalty under the category of "management, maintenance or repair service". Ld. Advocate on behalf of the applicants drew the attention of the Bench, the relevant portion of the Order-in-Original No.10./2013 (ST-ADC) dt. 28.2.2013, wherein it is observed that the appellants paid the service tax representing labour charges. Thus there is a demand of tax on the material portion alone. It is seen from the said adjudication order that the appellants contended that they are paying sales tax/VAT on the materials at the time of purchase and also at the time of delivery of retreaded tyres since it is a works contract service and the transfer of property amounts to 'sale" as per Article 366 (29A) of the Constitution of India. It is further seen from the adjudication order that appellant had adduced sales invoices, sales tax returns, VAT returns and sales tax assessment orders to prove that transfer of property in the retreading activity is leviable to sales tax.
4. We find that the Hon'ble Delhi High Court in the case of G.D. Builders Vs Union of India - 2012 (32) STR 673 (Del.) held that service tax can be levied on service component. In that case, the Hon'ble High Court remanded the matter to examine computation of components in detail. The relevant portions of the said judgement is reproduced herein below :-
"17.?It was accepted and stated on instructions by the respondents that the notifications in question (or rather partly in question) are optional and an assessee need not take benefit of the said notifications, if he so desires, but the Service Tax is to be levied and is payable on the service component of a composite contract, which can be computed. The notifications also specifically stipulate, when they apply and the preconditions which must be satisfied before they can be applied.
.... .... .... ....
36.?The aforesaid judgments and discussion highlight the following facets/principles :
(1)?After 46th Amendment to the Constitution, composite contracts can be bifurcated to compute value of the goods sold/supplied in contracts for construction of buildings with labour and material. The service portion of the composite contracts can be made subject matter of service tax. Aspect doctrine is applied for bifurcating/vivisect the composite contract.
(2)?Service tax can be levied on the service component of any contract involving service with sale of goods, etc. Computation of service component is a matter of detail and not a matter relating to validity of imposition of service tax. It is procedural and a matter of calculation. Merely because no rules are framed for computation, it does not follow that no tax is leviable.
(3)?The notifications in question are in alternative and optional. An assessee may take advantage or benefit of the notifications, but cannot be compelled to pay service tax on the proportion or value of a composite contract as per the notification. This is because the formula framed by way of delegated legislation is presumptuous and based on assumption.
(4)?However, if an assessee wants to take benefit of the notification, he must comply and adhere to the terms and conditions stipulated as per the notification.
(5)?An assessee to claim benefit or advantage as per a notification must meet the preconditions or stipulations stated therein. An assessee cannot take benefit or advantage of a part of a notification but claim that the other part of the notification should be ignored and thus not acted upon. Notification has to be applied in entirety.
(6)?Notification has to be read as a whole keeping in mind its objective and purpose. Notification may provide a convenient, hassle free and adopt a non-discretionary formula for computing value of the service element in a composite contract. This curtails litigation, ambiguity, ensures clarity and consistency. A notification cannot be declared as invalid or ultra vires for this reason, provided it is optional.
(7)?Authorities cannot compel and force an assessee to accept the notifications in question and pay tax accordingly, as seeking coverage under the notification is voluntary. An assessee can state that the service component of a composite contract should be computed in a fair and reasonable manner and accordingly taxed.
(8)?The notifications meet the tests laid down under Sections 93 and 94 of the Act because they relate to manner and mode of computation of service tax in a composite contract. The object and purpose is not to tax as non-service element or to include non-taxable part of the composite contracts.
(9)?It has not been shown and established that the formula or the value prescribed in the notifications is absurd or irrational. The said notifications are not per se an arbitrary exercise and contrary to data or formula for computing service element. In taxation matters, classification should not be struck down as discriminatory unless there are strong and compelling reasons that show absurdity and, therefore, violation of Article 14 of the Constitution."
5. In view of the decision of Hon'ble Delhi High Court (supra), we find that the matter should be re-examined by the adjudicating authority and decided in the light of the decision of the Hon'ble Delhi High Court in the case of G.D. Builders Vs UOI (supra). Accordingly, we set aside the impugned orders. All the appeals are remanded to the adjudicating authority to decide afresh in accordance with law. Needless to say that the adjudicating authority shall give reasonable opportunity of hearing before decision. All the appeals are allowed by way of remand. Stay applications are disposed of.
(Dictated and pronounced in open court)
(R. PERIASAMI) (P.K. DAS)
TECHNICAL MEMBER JUDICIAL MEMBER
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