By TIOL News Service

NEW DELHI, SEPT 02, 2015: IN this case, Revenue sought an early hearing on the ground that the 5 Member Larger Bench has answered the reference made in the L&T case vide Interim Order No. 72-74/2015 dated 19.03.2015 - 2015-TIOL-527-CESTAT-DEL-LB. As the appellant had no objection, the Misc. application was allowed.

The facts are that the appellant had filed an appeal against an o-in-o in terms of which service tax demand of Rs.68,34,000/-for the period 1.7.2003 to 31.3.2005 was confirmed on the ground that the appellant had not paid service tax on erection, commissioning or installation service and consulting engineer service rendered to M/s Vikram Cement.

The appellant inter alia contended that it received a purchase order from M/s Vikram Cement for design, engineering, supply and supervision of erection and commissioning of limestone crushing plant and which essentially is a supply order for the stone crushing plant.

The AR stated that commissioning was very much part of the purchase order and, therefore, it cannot be said that erection, commissioning or installation service has not been rendered.

The Bench observed -

We find that the entire impugned demand has been confirmed on the full value (Rs.670 lakhs) of the purchase order. It is further seen that the appellant was required to supply the plant and provide supervision of erection and commissioning thereof for which it was to depute its engineers for 30 man days at site in 3 visits free of cost. Para-11 of the purchase orders makes it clear that for such free of cost visits of the engineers even to a fro travel charges were not required to be paid by M/s Vikram Cement. While the Andhra Pradesh High Court in the case of CIT vs. Sundwiger EMFG & Co (supra) has held that such supervision of erection and commissioning has to be treated as part of sale and that such supervision is only incidental to the sale, we find that additionally in the present case there has been no charge for such supervision which has been provided free of cost. Thus there is no consideration received for such supervision. A careful perusal of the purchase order makes it clear that notwithstanding its subject-title, it is essentially for supply of limestone crushing plant. Even if it is held that there was a service component in the form of supervision of erection and commissioning of the plant supplied, the said service was manifestly rendered free of cost and thus no service tax liability can arise in this case as the value of the goods supplied cannot be included in the assessable value even as per Notification No. 12/2003-ST as no Cenvat credit has been taken by the appellant in respect of such goods.

Citing the apex court decision in Imagic Creative Pvt. Ltd. - 2008-TIOL-04-SC-VAT wherein it was held that VAT and service tax are mutually exclusive, the Bench held that the order was not sustainable and, therefore, the same was set aside and the appeal was allowed.

In passing: By the way, the Larger Bench decision is no longer a good law in view of the apex court decision dated 20.08.2015 reported by us as 2015-TIOL-187-SC-ST.

(See 2015-TIOL-1847-CESTAT-DEL)