The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad Bench held that no service tax can be demanded on erection, installation and commissioning of service as entire value suffered excise duty.
The respondent, Aalidhra Textool Engineers Pvt Ltd is engaged in the manufacturing of textile machineries. As per the contract with the buyer, on an agreed sales price, the respondent is under obligation to manufacture, pack, transport, deliver and erect and install the machinery at the buyer’s site.
The respondent has discharged excise duty on their total sale value including the erection, installation and commissioning of such machinery for the period July-2003 to March-2008. The adjudicating authority while adjudicating the show cause notices dropped the same vide adjudication order.
The revenue being aggrieved by the original order to the extent demand pertains to the period 01.06.2007 onwards, filed the present appeal on the ground that post 01.06.2007, since the respondent have supplied the goods and carried out erection, installation and commissioning, the service should have been classified under Works Contract Service and respondent was liable to pay service tax.
Tara Prakash, Assistant Commissioner (AR) appearing on behalf of the revenue-appellant submitted that there is no dispute that from 01.06.2007 onwards the supply of goods along with erection, installation and commissioning falls under the Works Contract Service and that composite activity is liable to service tax therefore, the adjudicating authority has erred in dropping the demand.
Amal Dave, 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.
The Counsel further submitted 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.
A Division Bench consisting of Ramesh Nair, Judicial Member and Raju, Technical Member observed that “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.”
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