| 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/-
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