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OIO No. 56/JC/2011
Dated 14.12.2011
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lhek “kqYd ,oa dsUnzh; mRikn “kqYd vk;qDrky;] dsUnzh; mRikn “kqYd Hkou]
jsl dkslZ] fjax jksM jktdksV-360001
OFFICE OF THE COMMISIONER OF CUSTOMS & CENTRAL EXCISE
RACE COURSE RING ROAD, RAJKOT-360001
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F.No V.ST/15-30/Adj./2006
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By RPAD/HAND DELIVERY
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Ekwy vkns”k Lka.
Order in Original NO.
56/JC/2011
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vkns”k dh frfFk
Date of Order:-
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14.12.2011
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tkjh djus dh frfFk
Date of Issue:-
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14.12.2011
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vkns”kdrkZ dk uke :
Passed by:
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,e- KkulqUnje
संयुक्त आयुक्त
ds0 m-0 “kqYd vk;qDrky;]
jktdksV
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ds lanHkZ esa :
In the matter of
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M/s. Antique Granito Pvt. Ltd.,
Lakhdhirpar Road,
Morbi.
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dkj.k crkvksa uksfVl la- &frfFk
Show Cause Notice No. & Date.
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V.RJT-II/AR-Morbi/Addl.Commr/100/2007 dated 7.8.2007
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1- ;g izfrfyfi ml O;fDr dks futh mi;ksx ds fy, fu%'kqYd nh xbZ gSA ftls ;g tkjh fd;k x;k gSA
1. This copy of order is granted free of charges to the person to whom it is issued.
2- bl vkns'k ls ;fn dksbZ O;fDr vlarq"V gS rks bl vkns'k ds fo:) fuEufyf[kr dks vihy dj ldrk gSA&vk;qDr ¼vihy½ lhek ,oa dsUnzh; mRikn 'kqYd] jsl dkslZ fjax jksM jktdksVA
2. Any person deeming himself aggrieved by this order may appeal against this order to the Commissioner (Appeals), Customs & Central Excise, Central Excise Bhavan, Race Course Ring Road, Rajkot.
3- vihy dk QkeZ ,l-Vh-&4 nks izfr esa Hkjk tk, ,oa mlds lkFk fu.kZ; dh izfrfyfi ;k lsokdj fu;e] 1994 dh dye 8 esa fofufnZ"V vuqlkj vkns'k ds fo:) vihy dh izfrfyfi gksuh pkfg,A
3. The Appeal should be filed in form ST-4 as per Rule 8 of Service Tax Rules, 1994 and it shall be signed by the person as specified in Rule 3 (2) of the Central Excise (Appeals) Rules, 2001.
4- ikVhZ }kjk bl vkns'k dks O;fDrxr izkIr fd, tkus dh rkjh[k ls ;k Mkd }kjk izkfIr dh rkjh[k ls rhu eghus ds vanj vihy Qkby dh tkuh pkfg,A
4. The appeal should be filed within three months from the date of receipt of this order. [Section 85 of the Finance Act, 1994].
5. blds lkFk fuEufyf[kr dkxtkr gksuh pkfg,A
5. The appeal should be accompanied by:
¼v½ ,slk vkns'k dh izfrfyfi ;k nwljs dh d izfrfyfi ftl ij uhps n'kkZ, v?khu fu/kkZfjr dksVZ dh Qhl LVsEi gksuh pkfg,A
(a) Copy of this order which should bear court fee stamp as prescribed under Schedule 1 of Article 6 of the Court Fee Stamp Act, 1870, as under:
(i) ;fn lCtsDV eSVj dh jde ;k ewY; ;k ewY; 50 :i; ;k 50 :i;s ls de gks rks :i;s 00-25 gksA
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If the amount or value of subject matter is rupees fifty or less, then Rs.0.25;
(ii) ;fn lCtsDV eSVj dh jde ;k ewY; ;k ewY; 50 :i; ;k 50 :i;s ls v/khd gks rks :i;s 00-50 gksA
(ii) If such amount exceed Rs.50, then, Rs.0.50 paisa.
¼c½ vihy izfrfyfi ftl ij :i;s 2-50 dh dksVZ Qh LVsEi gksuh pkfg,A
(b) A copy of the appeal should also bear a court fee stamp of Rs.2.50.
6. lsok dj ]naM ¼isuYVh½ vkfn ds Hkqxrku dk izek.k A
Proof of payment of duty, penalty etc., should also be attached to the original form of appeal.
Brief facts of the case:
M/s. Antique Granito Pvt. Ltd., Lakhdhirpar Road, Morbi (hereinafter referred to as "the noticee") are engaged in the manufacture of Vitrified Ceramic Tiles falling under Chapter (39 of the Schedule to the Central Excise Tariff Act, 1985 and are holding Central Excise Registration No. AAECA3248FXM001.
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On the basis of intelligence gathered by the Officers of Central Excise Division -II, Rajkot that the noticee had imported certain machineries like Kiln, Grinder, Dryer etc. from China and the installation of the same were carried out by the technicians of the seller. However, it was gathered that no service tax was paid by the noticee on the services of installation provided by the seller of the imported machinery. The factory premises of the noticee were visited on 05.10.2005 by officers of Central Excise Division-ll, Rajkot and the machineries and the documents were verified.
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On physical verification, it was found that the noticee had imported various machineries, as detailed below from M/s. Foshan Foodstuff Imp. & Exp. Company of Guangdong, China under Contract No. ISM 3/09/03 (INDIA) dated 13.09.2003 and proforma invoice No. PI 091304 dated 13.09.2003, valued at USD 792071. As admitted by the Director of the noticee, the installation of these machineries was carried out by the technicians provided by the seller company, who had no establishment or office in India.
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B/E.No. and date
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Description of machjne
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F-1147/08.09.2004
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Firing Department
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F-1037/16.08.2004
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Firing Department
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F-0938/26.07.2004
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Firing Department
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F-0971/02.08.2004
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Firing Department
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F-0846/C5.07.2004
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Firing Department Packing & Assembly
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F-0846/C5.07.2004
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Glazing Department & Firing Department
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F-0780/25.06.2004
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Glazing Department & Firing Department
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F-0735/14.06.2004
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Glazing Department & Dryer Department
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4. Rule 2 (d) (iv) of the Service Tax Rules, 1994 stipulates that where taxable service provided by a person who has established business or a fixed establishment from which the service is provided or has his permanent address in a country other than India, and such service provider does not have any office in India, the person who receives such service and has his place of business, fixed establishment, permanent address or as the case may be, usual place of residence in India, is liable to pay service tax.
5. The services of "Commissioning or Installation" are covered under Section 64 to 96-1 of the Finance Act, 1994, with effect from 01.07.2003. "Commissioning" was also included in this category of services with effect from the Finance Bill of 2004. The
definition of "Erection, Commissioning or Installation, as given in Section 65 (39a) of the Finance Act, 1994 reads as:
"Erection, Commissioning or Installation" means any service provided by a commissioning and installation agency, in relation to-
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erection, commissioning or installation of plant, machinery or equipment; or
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installation of—
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electrical and electronic devices, including wiring or fittings thereof; or
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plumbing, drain laying or other installation for transport of fluids; or
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heating, ventilation or air-conditioning, including related pipe work, duct work and sheet metal work; or
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thermal insulation, sound insulation, fire proofing or water proofing; or
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lift and escalator, fire escape staircases or travelators; or
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such other similar services."
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As per definition given at Section 65 (105) (zzd), "taxable service" means any service provided or to be provided to a customer, by an erection, commissioning and installation agency in relation to commissioning or installation.
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Section 66 of the Finance Act, 1994, as amended, is charging section for the purpose of Service Tax which specifies that there shall be levied a tax (hereinafter referred to as the service tax) at the rate of ten per cent of the value of the taxable services referred to in sub-clauses (a)……….. (zzd)…… of clause (105) of Section 65 of the Finance Act, 1994 and collected in such manner as may be prescribed. (The rate of service tax was 8% before 10-09-2004).
8. A statement dated 30.11.2005 of Shri Chunibhai Kalyanjibhai Kundariya, Director of the noticee was recorded under Section 14 of the Central Excise Act,1944 before the Superintendent (Preventive), Central Excise Division-ll, Rajkot wherein he interalia stated that the name of their company was changed from M/s. Antique Granito Ltd. to M/s. Antique Granito Pvt. Ltd. with effect from October-2005; that the main machineries in their factory viz. Kiln, Dryer, Grinding machine etc. were imported from M/s. Foshan Foodstuffs Imp. and Exp. Co. of Guagndong, China; that the photocopy of contract for such purchase dated 13.09.2003 and corresponding Proforma invoice No. PI 091304 dated 13.09.04 was provided by him; that the on page No. 1 of the contract, it was mentioned that if the buyer wishes, the seller shall send the technicians for installation and assembly of the machinery and for which the buyer would provide accommodation, transportation and pocket money @ 20 USD per day; that on page No. 16 of the contract, it is mentioned about price list that the prices are inclusive d equipment, installation and running fees; that according to the contract, 10-12 persons had come from China during August-2004 and started the work and completed the same in November-2004; that they had gone back after completion of installation and trial production; that they stayed for about three to three and half months; that the; technicians coming from China were accommodated in their quarters in their factor/ premises and lodging was arranged there only; that they had not given any pocket money to them; that they had not paid any amount to the technicians; that the amount mentioned in the contract was paid through Bank and no extra amount was paid to the Chinese company; that he produced photocopies of invoices, debit advices issued by Bank and Balance Sheet; that the payment was made before installation of the machinery; that the amount of interest USD 15721 shown in the Proforma invoice was not paid by them.
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From above, it appears that the service provider viz. M/s. Foshan Foodstuffs Imp. and Exp Co. of Guagndong, China is not having any office or establishment or permanent address in India and therefore, the noticee was liable to pay the Service Tax on installation services received by them, as per Rule 2 (d) (iv) of the
Service Tax Rules, 1994 The details of machineries, as per contract and the condition of installation, invoices and payment made are enclosed herewith as Annexure - A.
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Now, for the determination of value of services, it is observed that the contracted price is inclusive of installation charges and no separate charges for the services of installation has been mentioned either in contract or in invoices. Thus, Notification No.12/2003-ST dated 20.06 2003, which provides for exemption to taxable service to the
extent of value of goods and material sold by the service provider to the recipient of service, would not be available to the Noticee. Therefore, Notification No. 19/2003-ST dated 21.08.2003 would be applicable in the instant case. Notification No. 19/2003 provides for exemption to the extent of 67% of total value (gross amount charged from the customer under a contract for supplying plant and machinery or equipment and commissioning or installation of the said plant and machinery). Therefore, in view of Notification No. 19/2003-ST, service tax is leviable on 33% of total contract value.
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Now, for the relevant date for levy of service tax, it is noticed that payment is made during the months of June, July and August-2004, whereas actual installation took place between August-2004 to November- 2004. The rate of service tax changed with effect from 10.09.2004 from 8% to 10% plus 2% education cess. As per Rule 6 of
Service Tax Rules, 1994, in case payment is made before service is received; the amount has to be appropriated to month or quarter to which the same pertains. However, since? no such bifurcation is available, the calculation of service tax leviable is made considering the date of completion of installation of the machinery, as relevant
date viz. after 10.09.2004.
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On the basis of Notification No. 19/2003-ST dated 21.08.2003, the service tax, payable by the noticee is as under:
(1) Value of contract in USD - 776350/-
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Value in Rs. - 3,54,56,666/-
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33% of value (Noti. 19/2003) - 1,17,00,700/-
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Service Tax @ 10% in Rs - 11,70,070/-
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Education Cass @ 2% of ST in Rs - 23,401/-
TOTAL SERVICE TAX PAYBLE RS. : 11,93,471/-
13. From above, it appears that the noticee has contravened the following provisions:
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Section 68 of Finance Act, 1994 read with Rule 6 of Service Tax Rules, 1994 in as much as they failed to pay the service tax on the services of installation.
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Section 69 of Finance Act, 1994 read with Rule 4 of the Service Tax Rules, 1994 in as much as they failed to register themselves for the purpose of service tax.
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Section 70 of Finance Act, 1994 read with Rule 5 and Rule 7 of Service Tax Rules, 1994 in as much as they failed to maintain proper records and file required returns.
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The noticee never declared to the department regarding installation
services received by them from a foreign company, with a sole intention to evade the payment of service tax. Therefore, the proviso to Section 73 of the Finance Act, 1994 is invoked and extended period is applicable in the case, making the noticee liable to penal action under Section 73 of the Finance Act, 1994.
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Therefore, the noticee was asked to show cause to the Additional Commissioner, Central Excise & Customs, Rajkot having his office at 6th Floor, "Central Excise Bhavan", Race Course Ring Road, Rajkot, within 30 days from receipt of this Notice, as to why:
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The service tax Rs.11,93,471/- should not be recovered from them under Section 73 of the Finance Act, 1994 along with interest as chargeable under Section 75 of the Finance Act, 1994.
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Penalty should not be imposed upon them under Section 78 of the Finance Act, 1994.
DEFENCE SUBMISSION :
16. The main grounds of the defence made in the noticee’s letter dated 20.09.2007 are as under.
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The noticee has taken C.Ex. Registration No. AAECA3248FXM001 dated 15.12.03 and intimated the department about the implementation of the project hence the question of not informing the department has no merit. Also as per judgments given below, for invoking extended period ingredient of willful suppression, mis-declaration and intension to evade duty is must.
The noticee being Central Excise Registered manufacturer is entitled to avail CENVAT Credit of service tax paid/payable for input service, therefore, there is revenue neutral case. Hence provisions of extended period can not be invoked in the case, hence the demand it time-barred.
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The contract was for sale of machineries and not for installation of the machineries. Installation is optional subject to payment of expense for lodging/boarding and pocket expense of the technician sent by the seller. They have not paid any amount towards installation. Also, as per records, out of contract amount USD 776350/-, only USD 3000 is for engineering. They have paid Customs duty and CVD considering value of machineries as USD 776350/- , thus no service tax can be levied on same amount as sale/purchase of the goods can not be treated as service and as both levies are Central Levy.
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As they have produced Invoice/Bill of Entries evidencing value of goods, they are entitled benefit of Notification No. 12/2003-ST. referred case of Daelim Industrial Co. Ltd. Vs CCE Vadodara [ 2003(155) ELT 457 (Trib.)]
DISCUSSION AND FINDINGS:
17. I have carefully gone through the facts of the case on record including the show cause notice and the various defence replies. I find that the noticee had imported machineries which were installed/ commissioned by technicians of the suppliers who were not having office/establishment in India, before 16.04.06. It appeared that the services provided falls under taxable service of "Erection, Commissioning or Installation, as defined in Section 65 (39a) of the Finance Act, 1994. It appeared that the noticee being a service recipient was liable to pay tax on the services received as provided under Rule 2 (1) (d) (iv) of the Service Tax Rules, 1994.
18. It is seen that the period of provision of service was prior to the period 18.4.2006. The issue whether the tax liability on taxable services provided by a non resident or a person located outside India to a recipient in India on reverse charge basis is applicable from 1.1.2005 or from 18.4.2006 has been clarified by the Board instruction from file no F.No 276/8/2009-CX 8A dated 26.9.2011:
“Sub: Applicability of service tax on taxable services provided by a non-resident or a person located outside India to a recipient in India-reg.
Kind attention is invited to instruction F No. 275/7/2010-CX8A, dated 30.6.2010, wherein the Board had communicated its view that services tax on a taxable service received in India, when provided by a non-resident/person located outside India, would be applicable on reverse charge basis with effect from 1.1.2005, and that the ratio of judgement in M/s Indian National Shipowners Association (INSA) case [2009 (13) STR 235 (Bom)] would not apply to such cases. Further, direction was issued to field formations to defend the levy of service tax on such services for the period on or after 1.1.2005, as post INSA judgment, it has been held by the High Courts/Tribunal in a large number of cases, applying ratio thereof, that service tax on such services is leviable only w.e.f. 18.4.2006. However, the appeals filed by the department before the Hon’ble Supreme Court, for defending the levy of service tax on such services w.e.f. 1.1.2005, have been dismissed recently (subsequent to the issuance of said instruction dated 30.6.2010) in the following cases.
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SLP (C) No. 29539 of 2010 in CCE Vs Bhandari Hosiery Exports Ltd
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SLP (C)No. 18160 of 2010 in CST Vs Unitech Ltd
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SLP (C) No. 34208/09 of 2010 in UOI Vs S R Batliboi & Co.
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SLP (C)No. 328/332 of 2011 in UOI Vs Ernst & Young
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SLP (C) No. 25687-25688/2011 in CCE Vs Needle Industries
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SLP (C) No. 25689-25690/2011 in UOI Vs SKM Engg Products
Further, Review Petition No. 1686 of 2011 filed in the case of Bhandari Hosiery has also been dismissed by the Hon’ble Supreme Court vide order dated 18/8/2011.
2. In view of the aforementioned judgments of the Hon’ble Supreme Court, the service tax liability on any taxable service provided by a non resident or a person located outside India, to a recipient in India, would arise w.e.f. 18.4.2006, i.e., the date of enactment of section 66A of the Finance Act, 1994. The Board has accepted this position. Accordingly, the instruction F No. 275/7/2010-CX8A, dated 30.6.2010 stands rescinded. “
19. As discussed above I find that in this case, the services were provided prior to the period of 18.04.06 i.e. prior to enactment of Section 66A. Hence as clarified by the Board instruction quoted above no demand of service tax arises in this case and the show cause notice needs to be setaside.
20. In view of the above discussion, I pass the following order:
ORDER
I drop the proceedings initiated vide show cause No. V.RJT-II/AR-Morbi/Addl. Commr./100/2007 dated 07.08.2007.
(M. GNANASUNDARAM)
JOINT COMMISSIONER
F. No. V-ST/15-30/ADJ/06
By Reqd. Post AD:
To,
M/s. Antique Granito Pvt. Ltd.,
Lakhdhirpar Road,
Morbi.
Copy to:
(i) The Assistant Commissioner (RRA), Central Excise, HQ, Rajkot.
(ii) The Assistant Commissioner, Central Excise Division-ll, Rajkot.
(iii) The Superintendent, Central Excise AR- Morbi.
(iv) Guard file.
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