Service tax on Erection, Commissioning & Installation Service provided by 3rd party outside India

PJ/Case Laws/2011-12/1467

Case: SKIPPER ELECTRICALS INDIA LTD v/s COMMISSIONER OF C. EX., JAIPUR-I

Citation: 2011 (24) S.T.R. 417 (Tri. - Del.)

Issue:- Erection, Commissioning & Installation service provided by third party located outside India – prima facie held no service provided by applicant-assessee, demand not sustainable – stay granted.

Brief Facts:- Applicant-assessee is engaged in the manufacture and export of electrical transformers and in some cases, the applicant was also engaged by the foreign customers for installation and commissioning of the transformers and this work was got done through other contractors. Demand of service tax was raised from the applicant for this service.

Appellant’s Contention:- Applicant contended that the erectioning, commissioning and installation of transformers are done by third party located outside India and as the applicant has not provided any taxable service, the demand is not sustainable. They also relied upon the provisions of "Taxation of Services (Provided from Outside India and Received in India) Rules, 2006". In view of the Rule 3 (h), the provider who is located in India is liable to pay service tax where taxable service is partly performed in India. In the present case, no taxable service is partly provided in India; therefore, applicant has a strong case for waiver of pre-deposit of Service tax.

Respondent’s Contention:- Revenue contended that the applicant engaged the third party for providing erectioning, commissioning and installation of transformers and applicant is paying the consideration amount for such activity hence applicant has provided taxable service. It is also submitted that the transformers are manufactured in India and exported for installing at the customer's place, therefore, the service is partly provided in India.

Reasoning of Judgment:- The Tribunal found that the manufacturing and commissioning are different activities. Regarding commissioning and erectioning, the applicant had not done anything, rather that activity is undertaken by third party which is outside India. In view of this, it was prima facie found that as no part of service is performed in India hence the applicant has a strong case of waiver of pre-deposit of service tax, interest and penalty.

Decision:- Stay petition allowed.

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PJ/Case Laws/2011-12/1467

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