Custom, Excise & Service Tax Tribunal
Steel Authority Of India Ltd vs Bolpur on 22 July, 2025
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO. 1
Service Tax Appeal No. 79752 of 2018
(Arising out of Order-in-Appeal No.278-279/SKS/BOL/ST/2018-19 dated 23.04.2018
passed by Commissioner of Central Excise & Service Tax, Bolpur Commissionerate)
M/s Steel Authority of India Ltd. : Appellant
IISCO Steel Plant, Burnpur Works, Burnpur,
District-Burdwan, West Bengal-713 325.
VERSUS
Commissioner of Central Excise & Service Tax, : Respondent
Bolpur Commissionerate, Sian, Bolpur, Birbhum-731 204.
APPEARANCE:
Shri Rahul Tangri & Ms. Ekta Jhunjhunwala, Advocates for the Appellant Shri P.Das, Authorized Representative for the Respondent CORAM:
HON'BLE SHRI ASHOK JINDAL, MEMBER (JUDICIAL) HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL) FINAL ORDER NO. 77211/ 2025 DATE OF HEARING :22.07.2025 DATE OF DECISION:22.07.2025 Order : [Per Shri Ashok Jindal] The appellant is in appeal against the impugned order.
2. The facts of the case are as under:
A. M/s. Steel Authority of India Limited, IISCO Steel Plant is a 'Maharatna' category public sector undertaking falling under the administrative control of the Ministry of Steel, Government of India. The Appellant is engaged in the manufacture of excisable goods falling under Chapters 72 and 73 of the First Schedule to the Central Excise Tariff Act, 1985 and is duly registered with the Central Excise Department for payment of central excise duty. The Appellant is 2 Appeal No.: ST/79752/2018-DB also registered with the Service Tax Department for discharging its service tax liability, including on a reverse charge basis.
B. The Appellant entered into a tripartite contract dated 10.05.2006 with (i) M/s. SBW Electro Mechanics Import Export Corporation, China (hereinafter referred to as „SBW China‟), and (ii) M/s. TLT Engineering India Pvt. Ltd. Such contract was entered into for the purpose of design, engineering, supply, erection, installation, testing, commissioning, and demonstration of performance guarantee parameters for a new Turbo Blower Condenser and its associated facilities at ISP, Burnpur.
C. The said contract was a clearly divisible contract which separately identified the scope and value of services to be performed and goods to be supplied. The Price Schedule agreed with SBW China is tabulated below, for ease of reference:
Sl. No. Item description Price (USD) 1.0 Design & Engineering 1,15,000 2.0 Supply of Plant & Equipment (FOB 14,28,000 China Port basis) 3.0 Supply of Commissioning spares 1,05,000 (FOB China Port basis) 4.0 Foreign supervision charges in 1,50,000 India during Erection, Start-up, Commissioning, Training at site & PG Tests Total Contract Price (Imported 17,98,000 Portion) D. From the Price Schedule agreed with SBW China, as extracted above, it is evident that the value of goods and services has been specifically bifurcated in the contract and the value of service 3 Appeal No.: ST/79752/2018-DB elements, namely design & engineering and foreign supervision charges cumulatively amounted to USD 2,65,000.
E. Out of the said amount agreed between the Appellant and SBW China, USD 1,71,000 (equivalent to Rs. 77,77,652/-)was invoiced upto August 2007 (four invoices)on which applicable service tax of Rs. 9,60,997/-was duly discharged under the taxable category of "Consulting Engineering Services" on reverse charge basis. F. Against the aforesaid backdrop, a Show Cause Notice dated 11.01.2011 bearing No. 07/ADC/ST/BOL/11 was issued by the Department alleging that the services rendered by SBW China are classifiable under "Erection, Commissioning or Installation Services" as defined under Section 65(39a) of the Finance Act, 1994 (hereinafter referred to as „the Finance Act') and is accordingly taxable under Section 65(105)(zzd). It was further alleged that the value of taxable service is determinable at 33% of the contract value after allowing an abatement of 67% in terms of Notification No. 01/2006 - ST dated 01.03.2006. Accordingly, a demand of Rs. 26,43,489/- was raised on the Appellant on payment of Rs. 6,48,10,453/- made by the Appellant to SBW China under the contract till August 2007.
G. The Appellant filed a reply to the SCN vide letter dated 17.02.2011. However, without considering the submissions made by the Appellant, the Department proceeded to confirm the demand proposed in the SCN vide Order-in- Original No. 98/ADC/ST/BOL/11 dated 13.07.2011 which was further confirmed by Ld. 4 Appeal No.: ST/79752/2018-DB Additional Director General, DGTS, Kolkata vide the impugned order.
H. Being aggrieved with such O-I-A, the Appellant has filed the present appeal.
I. The Ld. Counsel on behalf of the appellant submits that the contract entered into with SBW China was a divisible contract wherein the value of goods and services were clearly bifurcated in the contract itself and invoices were also raised separately. With respect to goods imported from outside India, the Appellant was duly discharging customs duty and for the service component involved in the scope of work, service tax was duly discharged under Consulting Engineer Services.
3. He also submits that the service of design and engineering, supervision of commissioning, etc. are specifically covered within the ambit of consulting engineer services as also clarified vide Trade Notice No. 53-C.E. (Service Tax)/97, dated 4.7.1997.
4. Hence, the Appellant discharged service tax on the service element of the contract under consulting engineer services.
5. However, the impugned SCN proposed demand of service tax alleging that the subject transaction is chargeable to service tax under the category of Erection, Commissioning and Installation services after allowing an abatement of 67% in terms of Notification No. 1/2006 ibid, which has subsequently been confirmed vide the impugned order.
5Appeal No.: ST/79752/2018-DB
6. In this regard, it is humbly submitted that Hon‟ble Apex Court in the case of Commissioner v. Larsen & Toubro Ltd., 2015 (39) S.T.R. 913 (S.C.)clearly held that Section 65(105) of Finance Acthad levied Service Tax only on service simpliciter contracts and not composite indivisible works contracts until the specific category of works contract service has been introduced w.e.f. 01.06.2007. It was further held that Sections 65(105)(g), 65(105)(zzd), 65(105)(zzh), 65(105)(zzq) and 65(105)(zzzh) of the Finance Act were not sufficient for levying Service Tax on indivisible composite works contracts. Furthermore, the exemption notifications issued for such services wereheld to be immaterial, since levy of Service Tax itself was observed to be non-existent in respect of indivisible contracts involving both supply of goods and services.
7. Hence, demand confirmed by the Department relying upon Notification No. 1/2006 ibid. under the category of erection, commissioning and installation services including the value of material supply, when such category merely comprises of service simpliciter, is beyond the four corners of law and unwarranted.
8. In a catena of judgments, it has been held that provision of services along with material shall not be chargeable to service tax under any other specified category of services unless the same falls within the ambit of works contract services, even after 01.06.2007. He relied on the decision of the 6 Appeal No.: ST/79752/2018-DB Hon‟ble Chandigarh Tribunal in the case of CCE, Delhi v. Xerox India Ltd., 2019 (20) G.S.T.L. 96 (Tri. - Chan.).
9. Similar proposition has been upheld in the following judgments:
M/s Gainwell Commosales Private Limited vs. Commissioner of Central Excise and Service Tax, Ranchi reported as 2023 VIL 600 CESTAT KOLKATA. GE Power India Ltd. v. CCE, New Delhi, 2021 (2) TMI 116 - CESTAT New Delhi BSBK P Ltd. v. Commissioner, 2020 (12) TMI 1015 CESTAT New Delhi) Messrs NJ Devani Builders P Ltd. v.
UOI, 2020 (11) TMI 798 (Guj.) SEW Infrastructure Ltd. v. CCE, Raipur, Final Order No. 50640/2023 dated 02.05.2023, passed by Hon'ble CESTAT, New Delhi.
10. In view of the above, confirmation of demand under the category of erection, commissioning and installation services by including the value of materials, assuming the entire contract to be indivisible in nature, is unsustainable and liable to be set aside.
11. WITHOUT PREJUDICE TO THE ABOVE, THE ENTIRE DEMAND IS REVENUE NEUTRAL.
12. Without prejudice to the above, even if it is assumed that Service Tax was payable on the said transaction under reverse charge mechanism as demanded, the Appellant would have been eligible to avail CENVAT credit for the same, thereby leading to a revenue neutral situation. Hence, demand is liable to be set aside on this ground as well.
7Appeal No.: ST/79752/2018-DB
13. Reliance in this regard is placed on the decision of the Hon‟ble Supreme Court in the case of CCE, Pune v. Coca Cola India Pvt. Ltd. - 2007 (213) E.L.T. 490 (S.C.), wherein it was held that consequence of payment of excise duty after availing MODVAT credit are revenue neutral. Further, in the following cases, the demands under RCM were set aside on the principal of revenue neutrality:
Jet Airways (I) Ltd vs. Commissioner of Service Tax, Mumbai, 2016 (44) STR 465 (Tri-Mumbai), affirmed by Hon'ble Supreme Court, 2017 (7) GSTL J35 (SC).
Thrillophilia Travel Solutions Pvt Ltd vs. Commissioner of C. Ex., Jaipur, 2023 (71) GSTL 178 (Tri-Del) Varaha Infra Ltd vs. Commissioner of CGST, Jodhpur, 2023 (70) GSTL 469 (Tri-Del).
In view of the above, the entire demand is liable to be set aside on the ground of revenue neutrality.
14. EXTENDED PERIOD NOT INVOKABLE AND ENTIRE DEMAND LIABLE TO BE SET ASIDE ON THE GROUND OF BEING TIME-BARRED.
15. The Appellant humbly submits the entire demand has been confirmed invoking extended period of limitation. In this regard, it is humbly submitted that extended period is invokable only when the ingredients of fraud, suppression, etc. are present.
16. It is a settled position of law that suppression or collusion cannot be presumed against the PSUs/ Government undertakings.
8Appeal No.: ST/79752/2018-DB Reliance in this regard is placed on the following judgments:
IOCL v. CCE & CGST, Bhubaneswar, 2023 (12) TMI 1063 - CESTAT Kolkata M/s. Haldia Petrochemicals Ltd. v.
Commissioner of Service Tax, Kolkata - 2024 (4) TMI 10 - CESTAT Kolkata Markfed Refined Oil & Allied Indus.
Versus Commr. Of C. Ex., Jalandhar [2008 (229) E.L.T. 557 (Tri. - Del.)], affirmed by Commissioner v. Markfed Refined Oil & Allied Indus. - 2009 (243) E.L.T. A91 (P&H).
17. Hence, the presumption of fraud, suppression, etc. against the Appellant, which is a PSU, under the Ministry of Steel, Government of India, is unsustainable.
18. Further, it is a settled principle of law that extended period cannot be invoked in case of revenue neutral situation. Reliance in this regard is placed on the Hon‟ble Apex Court judgment pronounced in the case of Nirlon Ltd. Versus Commissioner Of Central Excise, Mumbai [2015 (320) E.L.T. 22 (S.C.)].
19. Furthermore, the fact of payment of service tax under the head „Consulting Engineer Services‟ was clearly evident from the ST-3 returns filed by the Appellant along with the service tax registration certificate wherein the type of services provided by the Appellant specifically included consulting engineer services. Hence, when the fact of payment of service tax under the said category was clearly known to the Department at the time when the 9 Appeal No.: ST/79752/2018-DB service tax returns were filed, raising demand on the Appellant invoking extended period of limitation, moreso when no positive evidence could be produced alleging fraud, suppression, etc., is untenable. Reliance in this regard is placed on the judgment of Anand Nishikawa Co. Ltd. Versus Commissioner Of Central Excise, Meerut [2005 (188) E.L.T. 149 (S.C.)].
20. Therefore, the entire demand confirmed invoking extended period of limitation is unwarranted and liable to be set aside.
21. WHEN DEMAND ITSELF IS NOT SUSTAINABLE, NO INTEREST IS PAYABLE, AND NO PENALTY IS IMPOSABLE.
When demand itself is not sustainable no interest is payable, and no penalty can be imposed on the Appellant.
22. On the other hand the Ld. Authorized Representative reiterated the findings of the impugned order.
23. Heard the parties. Considered the submission.
24. We find that the Revenue has sought demand under the category of erection, commissioning and installation service and want to include the supply portion into the taxable turnover of the appellant. On going through the details of the contract which are as under :
Sl. Item description Price (USD) No. 1.0 Design & Engineering 1,15,000 10 Appeal No.: ST/79752/2018-DB 2.0 Supply of Plant & Equipment 14,28,000 (FOB China Port basis) 3.0 Supply of Commissioning spares 1,05,000 (FOB China Port basis) 4.0 Foreign supervision charges in 1,50,000 India during Erection, Start-up, Commissioning, Training at site & PG Tests Total Contract Price (Imported 17,98,000 Portion)
25. We find that this Price Schedule includes supply as well as service. In that circumstances, the appropriate classification is Works Contract Service as held by the Hon‟ble Apex Court in the case of Larsen & Toubro Ltd. , 2015(39) S.T.R. 913 (S.C.) is held as under:
"41. We are afraid that there are several errors in this paragraph. The High Court first correctly holds that in the case of composite works contracts, the service elements should be bifurcated, ascertained and then taxed. The finding that this has, in fact been done by the Finance Act, 1994 is wholly incorrect as it ignores the second Gannon Dunkerley decision of this Court. Further, the finding that Section 67 of the Finance Act, which speaks of "gross amount charged", only speaks of the "gross amount charged" for service provided and not the gross amount of the works contract as a whole from which various deductions have to be made to arrive at the service element in the said contract.11
Appeal No.: ST/79752/2018-DB We find therefore, that this judgement is wholly incorrect in its conclusion that the Finance Act, 1994 contains both the charge and machinery for levy and assessment of service tax on indivisible works contracts."
26. Admittedly, it is a composite contract comprising of supply and service component therefore, merit classification of the service in question is Works Contract Service and no demand has been raised against the appellant under Works Contract Service. In that circumstances, whole of the demand is not sustainable against the appellant. In view of this we set aside the impugned order and allow the appeal with consequential relief, if any.
(Operative part of the order was pronounced in open court) (ASHOK JINDAL) MEMBER (JUDICIAL) (K. ANPAZHAKAN) MEMBER (TECHNICAL) RG