The Ahmedabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that the installation of thermal insulation is a “works contract service” and service tax is not demandable.
Intelligence was received that Rudra Engineering, the Appellant was wrongly availing abatement of 67% for calculating the taxable value for payment of service tax as per the provisions of Notification No. 1/2006-ST dated 01.03.2006 as amended.
On this basis inquiry was initiated and documents were scrutinized, it was found that the scope of work of the contract executed by the Appellant is (i) Hot insulation including supply of LRB and Aluminium Sheet (ii) Cold Insulation with Thermocol and Aluminium Sheets (iii) Insulation of pipeline with black superioan sleeve providing and fixing of black superioan sleeve with cellotape (iv) Insulation with black nitrite rubber foam, sheet, etc.
It appeared that the service provided by the said service provider of supplying and applying thermal insulation falls outside the purview of eligibility criteria for availing the benefit under Notification No. 1/2006-ST as they were not supplying plant, machinery, equipment or structures but carrying out the application of thermal insulation material on the plant, machinery, equipment already installed at the factory /business premises of the service receiver.
The Tribunal observed that the sale price of the material was not being separately shown in the invoice, however, substantial VAT/Sales Tax under the appropriate scheme and at appropriate rates were paid. The approx.. involvement of material in the work undertaken is about 70% of the total cost.
A Coram comprising of Mr Ramesh Nair, Member (Judicial) and Mr Raju, Member (Technical) observed that in clause (a) thermal insulation also mentioned and the appellant had also paid VAT/ sales tax on goods which is used in the installation of thermal insulation. Further held that “the impugned activity of the assessee was nothing but “works contract service”. “
While allowing the appeal, the impugned order was set aside. Shri Anil Gidwani, Advocate appeared for the Appellant and Shri Rajesh Agarwal, Superintendent appeared for the Respondent.
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