Service Tax
TRT-2025-
Cestat Kolkata
Date:-04-08-22
In:-
Issue Favourable to Tax Payer ?:- 0
Order date – 04 August 2022
Facts
- The appellant, M/s Gillander Arbuthnot & Co. Ltd, was awarded separate work orders for “sale/supply of goods” and provision of “Erection, Commissioning and Installation Services” thereof by M/s. Tata Steel Limited during the period from 2006 to 2011.
- A show cause notice was issue on 23 April 2012 alleging short payment of Service tax under the taxable category “Erection, Commissioning and Installation Services”
- The case of the Revenue is that the separate work order for supply of goods and services have to be construed as a single EPC contract for the purposes of discharge of service tax and that there has been an artificial splitting in the value of goods and services so as to inflate the value of goods and suppress the value of services.
- The SCN demanded differential Service tax from the Appellant by clubbing the value of goods with the value of services and also denied the benefit of deduction under Notification No.12/2003-ST dated 20 June 2003 on the ground that the recipient i.e. TSL ‟had availed the benefit of Cenvat credit on the goods supplied”.
- The commissioner imposed penalties under Section 77 and 78 of the Finance Act and demanded service tax along with interest.
- Aggrieved, the appellant filed for an appeal.
Issue
- Whether the penalties imposed under Section 77 and 78 of the Finance Act by Commissioner maintainable and whether the deduction under Notification No.12/2003-ST denied justified?
Order
- The Tribunal relied on the case of the Hon’ble Supreme Court in the L&T case and observed that the taxable category “Erection, Commissioning and Installation Services” could only cover pure service contracts within its fold.
- Since the work order for “Erection, Commissioning and Installation Services” was for consideration in money, the gross amount charged for such services alone could be subjected to service tax under Section 67(1)(i) of the Finance Act. The valuation framework as contained in Section 67 of the Finance Act does not seek to include within its ambit, any amount charged for sale/supply of goods.
- The Tribunal was in complete agreement with the Appellant that higher or lower profit margin with respect to sale of goods cannot be a ground for questioning the value of a taxable service.
- The authorities further observed that the reason given by the Ld. Commissioner for denying deduction with respect to the sale of goods to the Appellant under Notification No. 12/2003 is also unsustainable when the Appellant has undisputedly not availed any credit of excise duty on the goods sold to TSL.
- Hence the impugned Order is set aside and the appeal is allowed with consequential relief.
Download Case Law
