SC Justices M.R. Shah & B.V.Nagarathna [24-08-2022] – LegitEye
Read Judgment: Commissioner of Customs and Central Excise Vadodara – I v. M/s Jyoti Limited and Ors
New Delhi, August 25, 2022: The Supreme Court has come to the aid of an assessee-Company by dismissing the appeals filed by the revenue against the judgment of the Customs, Excise and Service Tax Appellate Tribunal, Ahmedabad, whereby the demand of duty and penalty as per the Revisional Authorities’ order was set aside.
Considering that at the relevant time, the assessee was not consulting engineer and/or rendering services as consulting engineering, the Division Bench of Justice M.R. Shah and Justice B.V.Nagarathna was of the opinion that the assessee was not liable to pay the service tax on the works contract or the contract rendering services as consulting engineer.
This taxation dispute was with respect to the period from July, 1997 to December, 2000. A show cause notice was issued against the respondent – assessee, proposing demand of duty (service tax demand) of over Rs 1 crore and proposing the imposition of penalty on the grounds that the assessee was providing the services to its customers as consulting engineer and therefore liable to pay the service tax.
Originally, the respondent – assessee company was engaged in the manufacture of mechanical, engineering and electrical goods falling under Chapters 84 and 85 of Central Excise Tariff Act, 1985 and in respect of certain buyers, the assessee merely sold their products. In respect of certain buyers, at their request, the assessee had undertaken certain activities like construction, civil works including installation, erection and commissioning of machinery as well as work of procuring some accessories and miscellaneous goods from other manufacturers or open market.
They collected amounts billed variedly as charges towards various activities. According to the Revenue the assessee collected a sum of over Rs 36 crore towards post clearing activities relating to the aforesaid period on which the assessee was liable to pay the service tax. The original authority had dropped the show cause notice on the ground that the services rendered by the assessee couldnot be said to be rendering services of consulting engineering. The Commissioner held the assessee liable but when the assessee filed an appeal before the Tribunal, the same was allowed. Aggrieved thereby, the Revenue approached the Top Court.
The Bench noted the fact that the Commissioner confirmed the demand of service tax merely on the ground that services rendered by the assessee could be said to be services rendered as Consulting Engineer and therefore liable to pay the service tax.
After considering the various services rendered by the assessee like erection/installation/commissioning of goods at customers site and incidentally providing the services of drawing, design etc.,the Bench refused to accept that the services rendered by the assessee was as a consulting engineer.
Observing that the assessee couldnot be said to be rendering the services as a consulting engineer and therefore liable to pay the service tax, the Bench asserted, “Therefore, once, the assessee at the relevant time cannot be said to be consulting engineer and/or rendering services as a consulting engineering the assessee is not liable to pay the service tax on the works contract or the contract rendering services as consulting engineer for the period under consideration namely July, 1997 to December, 2000.”
Holding that no error had been committed by the Tribunal in setting aside the order passed by the Commissioner and restoring the Order-in-Original passed by the Deputy Commissioner dropping the show cause notice and demand of service tax as well as penalty considering the nature of services rendered by the assessee, the Bench was in complete agreement with the view taken by the Tribunal. Hence, on such grounds the appeals were accordingly dismissed.