TMI Blog2007 (7) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... ows: a) The appellant company is engaged in the manufacture of mechanical, engineering and electrical goods falling under Chapters 84 and 85 of Central Excise Tariff Act, 1985. b) In respect of certain buyers, the appellant merely sold their products. In respect of certain buyers, at their request, the appellant has undertaken, at the customer's site, certain activities like construction, civil works including installation, erection and commissioning of machinery to the specific requirements of the customers. In such cases, they collected amounts billed variedly as charges towards erection, testing and calibrations, installation and commissioning , construction activities etc. In respect of some other buyers, they procured some accessories and miscellaneous goods from other manufacturers or open market and in such cases collected the price from their customers for supply of the said bought out items. c) They have, thus, collected a sum of Rs.36,95,14,983/-towards post clearing activities relating to the period July 97 to December 2000. d) A show cause notice dt.4.6.01 was issued, proposing demand of duty of Rs.1,84,75,749/- and proposing imposition of penalty under vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so relied on CBEC vide Circular No.43/5/97-TRU dt.2.7.97 which has clarified the scope of services of consulting engineers. It clarified that the said service includes one or more of the following category: * Feasibility study * Pre-designed services/project report * Basic design engineering * Detailed engineering * Procurement * Construction supervision and project management * Supervision of commissioning and initial operation * Man power planning and training * Post-operation and management * Trouble shooting and Technical services, including establishing systems and procedures for an existing plant. g) Commissioner confirmed the duty amounting to Rs.1,84,75,749/- and imposed penalty of Rs 3,69,51,498/ under Section 78 and also penalties under Sections 76 and77. He also imposed penalties of Rs.5 lakhs each on Shri Suresh Gandhi, General Manager (Finance) and Shri Suresh Singhal, Company Secretary of the appellant company. 4. The learned advocate submits that they have entered into a turn-key contract with the customer and such contract cannot be vivisected and part of the activities covered by the contract subjected to levy of the service tax. In sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Power Water Solution Inc. Vs. CCE Kanpur 7. Order dt.8.2.06 2006(3)STR 168 (Tri-Del.) CCE Raipur Vs. Beekay Engg. Corpn. 8. Order dt.21.3.06 2006(4)STR 63 (Tri-Mumbai) CCE Vadodara Vs. Larsen Toubro Ltd. 9. Order dt.15.6.06 2006(3)STR 765 (Tri-Bang.) M/s Turbotech Precision Engg. P. Ltd. Vs. CCE Bangalore-II 10. Order dt.9.10.06 2007(5)STR 353 (Tri-Bang.) M/s Blue Star Ltd. Vs. CCE Hyderabad-II 7.1. In case of Daelim Industrial Co.Ltd ., the contract was for construction, erection, and installation of desulphurization plant on payment of lump sum price. Primary objective of the contract was construction of desulphurization plant. The clause of contract left no doubt that the contract was Works contract on turn-key basis and not a consultancy contract. 7.2 In the case of Larsen Toubro Ltd., the issue involved was in relation to the execution of engineering project on Works contract terms and it was held that the design element of these contracts cannot be vivisected and charged to Service Tax as consulting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble from the facts of the above mentioned cases. Here, it is not a case of setting up of a plant. The activities undertaken by the appellant at the customer's site are not shown to be part of the indivisible works contract on a turnkey basis. The very fact that only some of the buyers are availing the services of the appellant company indicates that these activities cannot be considered as integral to setting up of a project on turnkey basis. Therefore, they stand as certain additional/optional services given to certain buyers/customers. The activities undertaken by them at the customers end can not be treated as part of any manufacturing activity but only as services rendered by them. 8.2. In such a situation, the ratio of Tribunal's decision in case of BSBK (P) Ltd (supra) . relied upon by the learned SDR will be applicable as the facts in the said case more akin to the facts the present case. The relevant portion of the findings from the said order is reproduced below: "5. Referring to the memorandum of Association of the respondent, the learned authorized representative brought out the fact that the main objects of the company included the work as engineers, design ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e consulting engineers vide Commissioner of Central Excise, New Delhi Trade Notice No. 54-C.E. (Service Tax)/97, dated 4-7-1997. It has also been clarified in the said trade notice that in case the services are rendered to the prime consultant, the levy of service tax does not fall on the sub-consultant. Further, the intention to include the "designing and drawing work" as services in turn-key project is also evident from CBEC Circular dated 18-12-2002. 6.5 The turn-key project contract entered into by the respondent is "divisible" as stated in the very letter of acceptance of tender dated 7-2-1996. In the impugned order the learned Commissioner (Appeals) has made the following observations :- "As held by CESTAT in the case of M/s. Daelim Industrial Co. Ltd. (supra) and also in the case of M/s. L T (supra) the work contract cannot be vivisected to select those activities which comprise taxable services". In the subject case the contract itself is "divisible" and no surgery to isolate the Siamese twin of services/goods has taken place. Further the expression "Vivisect" used profusely by both the sides has turned out quizzical, as Concise Oxford Dictionary defines ..... X X X X Extracts X X X X X X X X Extracts X X X X
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