TMI Blog2022 (12) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... e value is towards sale and has suffered the central excise duty. Reliance can be placed in the cases of COMMR. OF C. EX., VAPI VERSUS ALIDHARA TEXTOOL ENGINEERS PVT. LTD. [ 2009 (1) TMI 129 - CESTAT AHMEDABAD] and COMMR. OF C. EX., VAPI VERSUS ALIDHARA TEXTOOL ENGINEERS PVT. LTD. [ 2009 (1) TMI 129 - CESTAT AHMEDABAD] - From the above judgments, it is settled that where the entire value of the goods is towards sale of the goods and subjected to excise duty/customs duty no part of the same can be said to have been collected towards any service. Therefore, involving the same set of facts, in the present case where the entire value has suffered excise duty and the buyer is under obligation to not only manufacture and supply the machinery but also to carry out activity of erection, commissioning and installation of the said machinery, the service tax cannot be demanded. Classification of the service - erection, installation and commissioning service or works contract service? - taxability - HELD THAT:- The show cause notices have proposed the demand under erection, installation and commissioning service. We have decided that the service tax is not payable on the erection, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC) KONE ELEVATOR INDIA P LTD.- 2014 (304) ELT 161 (SC) 03. On the other hand Shri Amal Dave, learned counsel appearing on behalf of the respondent submits that the demand in the show cause notice was raised under erection, installation and commissioning service whereas, the department in the present appeals seeking the confirmation of demand on the same service under Works Contract Service. He submits that the classification of service proposed in the show cause notices cannot be altered or changed at the appellate stage therefore, the demand under works contract service as against the proposal of the same under Erection, Installation and Commissioning Service in the show cause notice cannot be confirmed. In this regard, he placed reliance on the following judgments:- PRECISION RUBBER INDUSTRIES (P) LTD.- 2016 (334) ELT 577 (S.C.) WARNER HINDUSTAN LTD.- 1999 (113) ELT 24 (S.C.) BRITISH ELECTRICALS- 2017 (345) ELT 535 (Tri.-Mumbai) 3.1 He further submits that there is no divisible portion of service in the entire supply of machinery. The respondent has manufactured and sold the machines to the buyer at his place including the activity of erection, installat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers for a lump sum amount and the sale price is inclusive of installation and commissioning charges. It is also not disputed that appellants have paid the Central Excise duty on the complete value and have not claimed any deduction on account of installation and commissioning charges. In fact, no segregated amount stands arrived at in the contract towards the installation or commissioning charges. This is also undisputed that the appellants have availed the services of sub-contractors in respect of erection, installation and commissioning and such sub-contractors have paid service tax on the same which subsequently stands reimbursed by the appellant. 9 . In view of the factual back drop, we may now refer to the definition of erection, commissioning and installation, as available in Section 65 (39a) of the Finance Act, 1994 :- (I) From 10-9-2004 to 15-6-2005 erection, commissioning or installation means any service provided by a commissioning and installation agency in relation to erection, commissioning or installation of plant, machinery or equipment; (II) From 16-6-2005 erection, commissioning or installation means any service provided by a comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d where there is no separate charging for erection and commissioning of equipments, levy of service tax on such activities cannot be held to be proper and legal. The Tribunal held that activity of installation, erection and commissioning was incidental to the deliver of goods to the customers and as such, no service tax can be confirmed against the appellants. 11 . Learned advocate has also drawn our attention to the decision of the Hon ble High Court of Madhya Pradesh in the case of Maa Sharda Wine Traders v. UOI - 2009 (15) S.T.R. 3 (M.P.), the question placed before the Hon ble High Court was as to whether bottling of liquor amounts to manufacture of liquor or only packaging so as to attract service tax. The Hon ble High Court observed that whether activity amount to manufacture or not it is incumbant to take note of any process which is incidental or ancillary to the completion of the final product, whether the final product is excisable or not. The Court further observed that the definition of manufacture as contained in Section 2(14) of the 1915 Act, is an inclusive definition which covers every process whether incidental or artificial by which the intoxicant is prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y mentioned by me earlier, the process of erection and commissioning at the buyer s premises is incidental to the manufacture of the machine and therefore the erection and commissioning services provided also can be said to be in relation to the manufacture, since the process in this case is complete only after the erection and commissioning takes place. The above observation made by the Tribunal, even though the issue involved was availment of Cenvat credit of service tax paid by them on erection and commissioning services, supports the appellant s case. 13. The Tribunal judgment in the case of Neo Structo Construction Limited - Order No. A/338-339/WZB/AHD/2010 dated 18-3-2010 [2010 (19) S.T.R. 361 (T)] was also produced before us in support of the contention that where the activities amounts to manufacture and excise duty is being paid on the entire contract value, no liability to pay service tax arises. Operative part of the said order is reproduced below :- 27. From the above discussion, it is clear that the activity undertaken by the appellant is covered under Section 2(f) of Central Excise Act as manufacturing activity. Hence the appellants are not lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hem. In reply to show cause notice, the appellants contended that they had been paying duty on the total invoice value of medical equipment charged from the customers, which establishes the activity of installation, commissioning or erection had been considered as part of sale. On perusal of the copy of the Central Excise invoice and the Annexure VI to the show cause notice, we find that the demand of tax was determined on the basis of Central Excise invoice value, as taxable value. It is also noticed that for some periods, taxable value has been taken as 33% of invoice value in terms of the Notification No. 19/2003-S.T. dated 21-8-2003 as amended. In some cases, total invoice value has been taken as taxable value since the appellant was availing Cenvat credit of invoice and benefit under Notification No. 19/03-S.T. dated 21st August, 2003 cannot be availed. The learned Advocate submits that in only one case, they charged commissioning and installation charges separately in the purchase order wherein they paid service tax. The main contention of the learned Advocate is that they have paid the Central Excise duty on the invoice value and the demand of tax on the said value is not su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the main object is the transfer of property and delivery of possession of the property, whereas the main object in a contract for work is not the transfer of the property but is one for work and labour. Another test often to be applied to is: when and how the property of the dealer in such a transaction passes to be customer is it by transfer at the time of delivery of the finished article as a chattel or by accession during the procession of work on fusion to the movable property of the customer? If it is the former, it is a sale if it the latter, it is a works contract . Therefore, in judging whether the contract is for a sale or for work and labour, the essence of the contract or the reality of the transaction as a whole has to be taken into consideration. The pre-dominant object of the contract the circumstances of the case and the custom of the trade provides a guide in deciding whether transaction is a sale or a works contract. Essentially, the question is of interpretation of the contract. It is settled law that the substance and not the form of the contract is material in determining the nature of transaction. No definite rule can be formulated to determine the questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Pvt. Ltd.- Final Order No. A/11894/2019 dated 17.09.2019. 4. We have carefully considered the submission made by both sides and perused the records. We find that the entire transaction is of purchase of imported bubble wrap machines. The appellants have discharged custom duty considering the total value of machine shown in the invoice. There is no separate charge for service such are erection and installation of such machinery. On the total value of the invoice, Custom duty was paid. The erection and installation is incidental to the sale/supply of the machine. Therefore, the entire transaction is of sale and purchase of the machine and, hence, no service is involved. Therefore, no Service Tax can be demanded. This issue is squarely covered by the Tribunal judgment in the case of Bhavik Terryab (supra) wherein the Tribunal has passed the following order. 5. We have heard both sides and perused the appeal records. We note that there is a certificate issued by the jurisdictional Superintendent of Central Excise on 07.07.2006 in connection with the appellant s obligation under the ECCG Scheme indicating the installation of 2 of the machines prior to 18.04.2006. Similarl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not permissible to artificially bifurcate the service value from the total value. Accordingly, no Service Tax can be demanded for such import. Being an identical issue and the facts involving in the present case, it is squarely covered by the judgment of Bhavik Terryab (supra). Following the ratio of the said decision, we set aside the impugned order and allow the appeal. From the above judgments, it is settled that where the entire value of the goods is towards sale of the goods and subjected to excise duty/customs duty no part of the same can be said to have been collected towards any service. Therefore, involving the same set of facts, in the present case where the entire value has suffered excise duty and the buyer is under obligation to not only manufacture and supply the machinery but also to carry out activity of erection, commissioning and installation of the said machinery, the service tax cannot be demanded. 4.1 The revenue also made a ground that after 01.06.2007 the service in the present case is classifiable and taxable under works contract service. However, the show cause notices have proposed the demand under erection, installation and commissioning servic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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