Whether fabrication of steel storage tanks embedded to Earth at customer’s premises taxable under ‘BAS’?

PJ/CASE LAW/2014-15/2524

Case:-C.C.E., KANPUR VERSUS KUNAL FABRICATORS & ENGINEERING WORKS

Citation:- 2014 (36) S.T.R. 549 (Tri. - Del.)

Brief facts:- The respondent are registered with Service Tax Department for providing Business Auxiliary Service and payment of service on the Goods Transport Agency. On receipt of an intelligence that they are taking up the job of maintenance and repair and job work without paying any service tax on the same, an inquiry was initiated against them. After inquiry, it was found that during the period of dispute, that is, during period from 10-9-2004 to 31-3-2006, they had undertaken repair and maintenance job in respect of which no service tax had been paid and beside this they had fabricated steel storage tanks, dozers and settlers, steel structures, steel platforms, railing, foundation frames, etc., in their client’s factory and had erected and installed the same, which according to the Department is Business Auxiliary Service in respect of which no service tax was paid. On this basis, the Jurisdictional Assistant Commissioner vide order-in-original dated 19-9-2008 confirmed service tax demand of Rs. 1,80,824/- against the respondent along with interest thereon and beside this while imposed penalty of equal amount on them under Section 78 of the Finance Act, 1994, another penalty of Rs. 1,000/- on them was imposed under Section 77 ibid. On appeal being filed to Commissioner (Appeals), against this order of the Assistant Commissioner, the Commissioner (Appeals) vide order-in-appeal dated 17-11-2008 set aside the Assistant Commissioner’s order and allowed the appeal. The Commissioner (Appeals) set aside the service tax demand on account of repair and maintenance service alleged to have been provided by the respondent, on the ground that though the demand is for the period from 16-6-2005 to 31-3-2006, during this period, only the repair and maintenance jobs done in terms of some contract or agreement were taxable and it has not been shown by the Department that repair jobs undertaken by the respondent were against some contracts or agreements. The service tax demand in respect of Business Auxiliary Service has been set aside on the ground that the activity which has been treated by the Department as Business Auxiliary Service is the fabrication of steel storage tanks, dozers and settlers, steel structures, steel platforms, railing, foundation frames, etc., and their erection and installation and that this activity does not fall under the category of Business Auxiliary Service. Against the above order of the Commissioner (Appeals), this appeal has been filed by the Revenue. The respondent has filed a cross-objection in respect of the Revenue’s appeal.

Appellant’s contention:- Mrs. Suchitra Sharma, the learned Jt. CDR, assailed the impugned order by reiterating the grounds of appeal in the Revenue’s appeal and she emphasized that the repair jobs undertaken by the respondent were covered by the taxable service of repair and maintenance and it was not necessary that those jobs should have been performed in terms of some contract or agreement. With regard to the duty demand based on the Business Auxiliary Service alleged to have been provided by the respondent, she pleaded that the respondent during the period of dispute had fabricated steel storage tanks, dozers and settlers, steel structures, steel platforms, railing, foundation frames, etc,. and had erected and installed the same in the factory and after erection and installation, the same having become embedded to earth become non-excisable goods and hence the entire activity of the respondent would have to be treated as Business Auxiliary Service. She, therefore, pleaded that the impugned order is not correct.

Respondent’s contention:- Shri A.P. Mathur, Advocate, the learned Counsel for the respondent, defended the impugned order by reiterating the findings of the Commissioner (Appeals).

Reasoning of judgment:- As regards the service tax demand based on the repair and maintenance service alleged to have been provided by the respondent, The Hon’ble Court find that during the period of dispute, the repair and maintenance service which was taxable was that activity of repair and maintenance which was in terms of some contract or agreement, while according to the findings of the Commissioner (Appeals), no evidence has been produced by the Department that the repair and maintenance jobs of the respondent were in terms of some contracts or agreements. Therefore, they do not find any infirmity in the finding of the Commissioner (Appeals) that the respondent’s activity did not attract any service tax.

As regards, the allegation that the respondent have provided the Business Auxiliary Service, they find that the activity which has been treated by the Department as Business Auxiliary Service, as described in the grounds of appeal, is fabrication of steel storage tanks, dozers and settlers, steel structures, steel platforms, railing, foundation frames, etc., and their erection and installation in the factory. According to the Department, since after installation of these steel tanks and structures, the same, became embedded to earth, the entire activity of the respondent would have to be treated as Business Auxiliary Service covered by the definition of this expression in Section 65(19) of the Finance Act, 1994. They have gone through the definition of Business Auxiliary Service as given in Section 65(19) of the Finance Act, 1994 and they have not been able to find any clause of Section 65(19) which covers this activity. While fabrication of tanks and steel structures being manufactured is not production or processing not amounts to manufacture, the erection and installation of tanks, dozers, settlers, and steel structures is certainly not covered by any clause of Section 65(19). Therefore, they agree with the findings of the Commissioner (Appeals) that this activity of the respondent is not covered by the definition of Business Auxiliary Service and hence the same is not taxable.

In view of the above discussion, they do not find infirmity in the impugned order. The Revenue’s appeal is dismissed. The cross-objection also stands disposed of.

Decision:- Appeal dismissed.

Comment:- The analogy of the case is that earlier repair and maintenance was taxable only if the repair and maintenance was done under any contract or agreement. Further, the activity of the fabrication of tanks and steel structures is not covered specifically by any of the clause of business auxiliary service. Hence it will not be taxable under the head business auxiliary service.

Prepared by:- Monika Tak

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PJ/CASE LAW/2014-15/2524

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