2014 (3) TMI 143 - AT - Service Tax

Waiver of predeposit of service tax - Imposition of equal amount of penalty imposed under Section 78 and penalty imposed under Section 76 - Held that - Applicant had received the service of M/s. Fels Cranes Pvt. Ltd. Singapore an overseas company against a contract for designing manufacturing supplying installing testing and commissioning of 4 numbers of Rubber Tyred Cranes - Prima facie the entire contractual value had been assessed to customs duty considering the same as goods. Consequently even if it is considered as works contract comprising the value of goods as well as the services the principle of vivisecting the contract at this stage cannot be considered as the issue had been referred to the Larger Bench. Besides we find that the Applicant Company being a Government of India Undertaking and the issue prima facie being not settled the Applicant could able to make out a case for total waiver of the dues adjudged. Consequently predeposit of all dues adjudged is waived and its recovery stayed during pendency of the Appeal - Stay granted.

Summary

Issues:
Waiver of predeposit of service tax and penalties under Sections 78 and 76 of the Finance Act, 1994 for a contract involving design, installation, and commissioning of cranes imported from an overseas company.

Analysis:
The Appellant sought waiver of predeposit of service tax and penalties imposed under Sections 78 and 76 of the Finance Act, 1994, amounting to Rs. 88,47,922. The Appellant had engaged an overseas company for the design, installation, and commissioning of Rubber Tyred Gantry Cranes (RTYGCs) at two dock complexes. The cranes were imported and commissioned in 2007, with customs duty paid on the entire contract value. The Appellant argued that since customs duty was paid on the goods, no service tax should be levied. They also contended that if not considered a sale, the transaction should be treated as a works contract. The issue of vivisecting works contracts and EPC contracts was unsettled, with conflicting opinions by different Tribunal benches.

The Revenue argued against the waiver, stating that a Government opinion deemed the contract as a sale, not a works contract. They maintained that payment of customs duty did not exempt the service tax liability, citing valuation rules and the aspect theory by the Supreme Court. The Revenue Commissioner had allowed an abatement of 67% under Notification No.1/2006-ST, confirming the demand.

After hearing both sides, the Tribunal found that the overseas company provided services under the contract for the cranes. Customs duty was paid on the entire contract value, but the Revenue contended that service tax should still apply to the service component. The Tribunal acknowledged the Government opinion but noted that the issue of vivisecting the contract was pending before a Larger Bench. Considering the unsettled nature of the issue, the Tribunal granted total waiver of the dues adjudged, staying the recovery during the appeal's pendency. The stay petition was allowed, and the decision was dictated and pronounced in open court.