ORDER
T.K. Jayaraman, Member (T)
1. The Revenue has filed this appeal against the Order-in-Appeal No. 12/2006 dated 27.01.2006, passed by the Commissioner of Central Excise (Appeal-II), Bangalore.
2. The Revenue proceeded against the Respondents on the ground that they were rendering taxable services under the category of “Commissioning & Installation and Consulting Engineers Services”. The Respondents initially discharged the service tax liability under the amnesty scheme. On realizing that they were not liable to pay any service tax, they applied for refund. A show cause notice dated 18.04.2005 was issued for rejection of the refund claim. The original authority has held that the Respondents were rendering taxable services and hence, rejected the refund claim to the tune of Rs. 2,33,111/-. They paid interest also. The Respondents approached the Commissioner (Appeals). The Commissioner (Appeals) relying on the decision of the Tribunal rendered in the case of Daelim industrial Co. Ltd. v. CCE set aside the Order-in-Original. The findings recorded by the Commissioner (Appeals) in the impugned order are as follows:
In the instant case the lower authority has agreed in principal that service tax on erection services has come into effect from 10.9.2004 but since there was no break up of income towards design, commissioning, installation and erection of the plant, service tax was demanded on the entire amount.
From the facts of the case I find that the appellant is not liable for service tax under any category for the simple reason that he is not providing any taxable service. On the contrary the appellant is undertaking turnkey projects which is not a service but a works contract. The Hon’ble Tribunal in the above cited case held that a works contract cannot be vivisected and part of it subjected to tax.
3. The Revenue is aggrieved over the impugned order on the following grounds :
Merely because the work undertaken is a ‘turnkey project’ or ‘works contract’, it cannot be concluded that no taxable service was rendered by the assessee. Whether a ‘turnkey project’ or ‘works contract’ includes any taxable services, would be evident from the scope of the works. In the present case, the work undertaken by the assessee included installation & commissioning, which are distinct taxable services during the period covered by the OIO/OIA. As such the Commissioner (Appeals)’s findings that because it was a turn key project or works contract, the installation and commissioning would not be leviable to Service Tax, is not correct. Since the assessee did not furnish break-up of various elements of the contract the entire amount was taken into for levy of Service Tax, in accordance with Central Board of Excise and Customs’s Circular No. 59/8/2003 dated 20.06.2003. Further, the above cited Board’s instruction is binding on the revenue authorities, including the Commissioner (Appeals) and this is well settled by a plethora of judgments inducting the Hon’ble Supreme Court’s judgment in the case of Ranadey Micronutrients v. CCE . Therefore the OIA No. 12/2006 dated 27.01.2006 is not correct, proper and legal.
4. The learned Departmental Representative argued that the decision of this Tribunal in the case of Transformers & Electricals Kerala Ltd. v. CCE, Cochin Final Order Nos. 1140 & 1141/2007 dated 25.09.2007 is squarely applicable to this case. He stated that there is no dispute that the appellants are rendering the services of erection, installation, commission, etc. He submitted that they had not actually given the break-up of various elements and therefore the decision should be taken after directing them to give the details.
5. On the other hand, the learned Advocate appearing for the Respondents submitted that the assessee in the instant case entered into a ‘works contract’ involving supply of materials, erection, commissioning & installation. In any case, the primary activity of the appellants was only erection which came into effect from 10.2.2004. As the relevant period is prior to that, even under the category of erection service, the Respondent is not liable to pay Service Tax. Further, it was pleaded that the present case is squarely covered by the decision of the Tribunal in case of Daelim Industrial Co. Ltd. v. CCE . As per the contract, only a consolidated payment is received by the Respondents at different stages. There is no possibility of splitting up the amount received for different services rendered and also for the material supplied. In the Daelim Industries Co. Ltd. case also there was ‘works contract’ and the Department tried to collect Service Tax under the category of Engineering Services by taking out certain element of contract. In these circumstances, it was held that the ‘works contract’ of turn key projects cannot be vivisected. Similar is the situation herein.
6. My attention was also invited to the decision of the Larger Bench of the Tribunal in case of CCE, Raigad v. Indian Oil Tanking Ltd. 2008 (84) RLT 550 (CESTAT-LB). Even though the Larger Bench has not decided the issue, the effect of above order is that Daelim Industries Co. Ltd. case will hold good. Further reliance was placed on the decision in case of Jyoti Ltd v. CCE, Vadodara 2008 (9) STR 373 (Tri. – Ahmd.) wherein the Tribunal has held that the decision in the case of CCE, Raipur v. BSBK P. Ltd. reported in 2007 (5) STR 124 (Tri. – Del.) wherein it was held that ‘works contract’ would be liable to Service Tax only from June 2007 and not during the earlier period. This point was also strongly urged by the learned Advocate. The Respondents have also started paying Service Tax under the category of ‘works contract’ from June 2004.
7. On a very careful consideration of the issue, I am of the view that the Commissioner has given a decision based on the facts of the case and also the prevailing rulings. As of now, the Department has not shown any evidence that the Respondents had received separate charges in respect of the different services rendered by them. It is for the Revenue to investigate the matter and to take appropriate action. As far as the Tribunal is concerned, I have to go by the available records. It is very clear from the Order-in-Original and also the impugned order that as of now, there is no evidence for receiving separate consideration for each of the service rendered by the Respondents. In any case, the fact that the services rendered by the Respondents come under the category of ‘works contract’ is not in dispute. When such is the case, the ratio of Daelim Industries Co. Ltd. case would be clearly applicable in the absence of contrary evidence. In these circumstances, the impugned order is legal and proper. Hence I reject the Department’s appeal.
(Pronounced and dictated in the open court)