ORDER
S.L. Peeran, Member (J)
1. This appeal arises from OIO No. 01/2006-ST dated 12-1-2006 by which the Service Tax has been confirmed on the services viz. “Supply, Installation and Commissioning”. The allegation is that the assessee did not arrive at the true value of the taxable services. It was alleged in the Show Cause Notice that a consolidated bill for supply, installation and commission of Air Conditioning System was issued by the assessee. As they had short paid the levy by not taking into consideration the erection, installation and commissioning of Air Conditioning Systems and labour component therein, therefore, the service tax was re-calculated and demands confirmed. The appellants’ contention was that they had paid the correct duty in the matter and, therefore, the elements as alleged by the Revenue is not required to be added in the supply, installation or commissioning charges. The Revenue’s contention was that in terms of Notification No. 19/2003, the appellants were required to have calculated the due tax at 33% of the gross amount charged from the customers under a contract for supplying a plant, machinery or equipment and commissioning or installation of the said plant, machinery or equipment. The contention of the appellant is that the exemption in the Notification is subject to complying with two conditions mentioned in the notification.
(i) The exemption is optional to the commissioning and installation agency; and
(ii) the benefit under this notification shall be allowed only if the commissioning and installation agency has not availed the benefit under the Notification of the Government of India, in the Ministry of Finance (Department of Revenue), No. 12/2003-Service Tax dated 20-6-2003.
It is submitted that the learned Commissioner refers to Notification granting exemption, however, he has erred in holding that “it is nowhere stated that this exemption is relatable to the value of goods used in commissioning or installation.” It is submitted that the learned Commissioner has imported words in the Notification and such importing of words in a Notification is not permissible in law.
2. The learned Counsel submits that the very issue on identical facts has been decided in the case of CCE & C v. Larsen & Toubro Ltd. 2006 (4) S.T.R. 63 (Tri.-Mum.) : (2006) 4 STT 12 (CESTAT-Mum.). He also refers to Daelim Industrial Co. Ltd. v. CCE, Vadodara 2006 (3) S.T.R. 124 (T) and Larsen & Toubro Ltd. v. CCE, Cochin 2006 (3) S.T.R. 233 (T). The learned Counsel also submits that the Revenue’s appeal against Daelim Industrial Co. Ltd. has been rejected by the Apex Court as . He submitted that in view of these judgments, the appeal is required to be allowed. He also submits that full waiver was granted and the stay application was allowed based on these circumstances.
3. The learned JDR reiterates the departmental view.
4. On a careful consideration, we notice that this very aspect pertaining to the work contract i.e. whether it should be vivisected and part of it be subjected to duty was considered in all the above judgments. The Tribunal, in the case of CCE v. Larsen & Toubro (cited supra), after due consideration, upheld the assessees’ contention and set aside the demands as raised in the present case also. The findings recorded in para 31 are reproduced herein below:
31. We have considered the submissions made by both the parties. We find that facts of the present case are squarely covered by the Tribunal decision in the case of Daelim Industrial Co. Ltd. (supra) and the department’s SLP in the case of Daelim Industrial Co. (Supra) has been dismissed by the Apex Court. Further, the decision of the Daelim Industrial has been followed by this Tribunal in the case of L & T Ltd. (supra). Its ratio has also been referred to by the Gujarat High Court in the case of Elecon F.ngg. Co. Ltd. (supra). Further in Ircon International Ltd. (supra), Tribunal has held that construction contract could not be subjected to service tax as consulting engineering service, either as a whole or in part and further observed that position remains covered by the decision in the case of Daelim Industrial Co. Ltd. (supra). Revenue has not been able to distinguish the present contract from that involved in Daelim case because the contract in the present cases are essentially for construction and not for the services and the services referred to are an integral part of contract. The contract is a work contract on a turnkey basis and not a consultancy contract. It is well-settled by series of case laws that a work contract cannot be vivisected and part of it subjected to tax. The decision in the Associated Hotels case does not lend any support to the revenue as a solitary instance cited by the learned S.D.R. in the case of S. Krishna of Andhra Pradesh High Court has been undone by the Supreme Court in Guntur Tobacco Ltd.’s case (supra) by the appellants. The 46th amendment to the Constitution has also not made any difference to the decision of Associated Hotels as it was mainly with respect to sales tax which introduced deeming provision which is not the case before us. The Kerala High court decision in Kerala Colour Lab Association’s case (supra) also does not help revenue as in that case the principal contract was that of service and not of sale of photographic material and, therefore, it was correctly held that once the taxing event is rendering of service and the entire activity of the assessee answer the description of taxable photography service, it is the service which will be chargeable to service tax and the agreement cannot be considered as that of sale of photographic material. In the present case, the principal object of the contract is that of construction and not of rendering any service and accordingly, service tax cannot be levied on service portion of the contract.
We notice that this judgment has been followed in the other rulings as noted supra. In view of the issue decided in assessees’ favour, the confirmation of demand is not justified. The same are set aside by allowing the appeal with consequential relief, if any.
(Pronounced and dictated in open Court)