The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashed service tax demand and noted that the composite contract cannot be artificially bifurcated to levy service.
The appellant (M/s.Walchandnagar Industries Ltd – WIL) was engaged in setting up of cement manufacturing unit for M/s. JUD Cements Pvt.Ltd. (‘JUD’). The appellant received gross amount of Rs.65,76,56,249/-, towards the value of supply of goods, which include some of the goods manufactured by them. The remaining goods were procured by the appellant from other sources and sold to JUD at a profit.
The Department alleged that the appellant has provided ‘Consulting Engineering Service’ to JUD, but failed to discharge service tax amounting to Rs.1,81,30,014/- including Education Cess and Higher Education Cess. Accordingly, a Show Cause Notice was issued to the appellant demanding Service Tax along with interest. The Notice was adjudicated vide Order-in-Original by the Commissioner of Central Excise confirming the demands made in the Notice. Aggrieved against this impugned order, the appellant filed the present appeal.
The appellant stated that the department has taken the entire value of Rs.52,08,55,249/- as value meant for providing ‘Consulting Engineer’s service, after excluding the value of Rs.13,68,01,000/- towards their own manufactured goods from the gross receipt of Rs.65,76,56,249/-. They have not taken into account the bought-out items supplied by the appellant. Accordingly, the appellant contended that the demand made in the Notice is not sustainable.
A Two-Member Bench of the Tribunal comprising PK Choudhary, Judicial Member and K Anpazhakan, Technical Member observed that “There is no value assigned for any service in the contract. In addition to supply of goods, the Appellant rendered the service of supervising the erection, installation and commissioning of the plant, which is liable to service tax. Even though there was no separate value assigned for this service in the contract, the Appellant worked out the cost of these services based on the man hours used for these services and paid service tax of Rs.8,76,154/-.”
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