Demand of Service Tax under Works Contract Service can't be charged when assessee predominantly engages in Manufacture and Sale of Goods: CESTAT [Read Order]

The Ahmedabad Bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that the demand of service tax under works contract service can't be charged when the assessee predominantly engages in the manufacture and sale of goods.

Shri A. Banerjee, Advocate appeared for the Appellant and Shri R P Parekh appeared for the Revenue.

Perfect Ready Mix Concrete, the appellant is engaged in the manufacture of Ready-Mix-Concrete(RMC) falling under the chapter heading 38245010 of the first schedule of the Central Excise Tariff Act, 1985 and they had been discharging their Central Excise liabilities on the manufacturing of RMC @2% in terms of the Notification No. 01/2011-C.E. dated 01.03.2011 without availing of Cenvat Credit. While supplying their RMC, they are also undertaking the activity of laying RMC using concrete pumping at the site of the buyer of RMC.

On removal of RMC from the factory, the appellant is paying Central Excise duty. The department is of opinion that it is a composite contract for the supply and laying of RMC that falls under a works contract and is liable to service tax. On scrutiny of the Balance Sheet, it also appears that they received rent income on account of the transfer of tangible goods service and received legal services. On which they are liable to pay service tax. 

The impugned order-in-original was passed wherein it was held that the activity of the appellant i.e. supply of RMC at the buyer’s site is classifiable as Works Contract service and demand of service tax amounting to Rs. 2,22,53,396/- for the period April 2015 to June 2017 was confirmed. Service tax demand of Rs. 5,990/- was also confirmed on legal service under reverse charge under Section 73 of the Finance Act, 1994. , further, interest under Section 75 was demanded and penalties were imposed on the appellant.

It was observed by the CESTAT that as per the nature of the product, it is necessary to supply RMC in a specialized container and after reaching the customer’s site RMC is delivered by carrying out the process of pouring, pumping and laying of concrete at the customer’s place. The RMC cannot be unloaded at a particular place and thereafter shifted the same to a different particular place at the site.

The CESTAT bench of Mr Ramesh Nair, Member (Judicial) and Mr Raju, Member (Technical) observed that the appellant being the manufacturer of RMC, paying excise duty not only on the value of the goods but also on the value of service of pumping, laying of concrete and the same is included in the sale value.

It was observed by the CESTAT that the manufacturing activity of RMC cannot be covered under the Works Contract by any stretch of the imagination and held that the activity of the appellant is predominantly of manufacture and sale of goods, thus the same cannot be charged with service tax under Works Contract service.  While allowing the appeal the impugned order was set aside.

To Read the full text of the Order CLICK HERE

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