CX - appellant clears transformers & pays duty by availing CENVAT - prima facie denial of credit on ground that in respect of service provided of commissioning of such transformers, appellant paying ST by availing Works Contract Scheme cannot be upheld - Stay granted: CESTAT
By TIOL News Service
AHMEDABAD, JUNE 12, 2014: THE appellant is a manufacturer of transformers and has executed a contract with M/s. Sunil Hitech Engineers Ltd. for supply, erection and commissioning of transformers.
The adjudicating authority is of the view that the appellant is not eligible to avail the CENVAT Credit on the inputs which were procured and consumed for manufacturing of transformers as they have discharged the service tax liability under the category of Works Contract services by availing Composition Scheme and that they having availed the CENVAT Credit they should not have availed and discharged tax under Works Contract composition scheme.
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The adjudicating authority confirmed the demand of duty (apparently CENVAT) under the CEA, 1944, interest thereof and imposed equivalent amount of penalty on the appellant and imposed penalty on the Managing Director; the adjudicating authority has confirmed Service Tax liability, interest thereof and penalties under various section on the main appellant and imposed penalty on the Managing Director under Section 77(2) of the Finance Act, 1994 and imposed penalty of Rs.20 lakhs u/s 77 on M/s. Sunil Hitech Engineers Ltd.
The appellant is before the CESTAT and relies on the decision in Essar Projects (India) Ltd. – 2013-TIOL-1951-CESTAT-AHM wherein the bench had specifically held that separate contracts if entered for supplies and services, the same has to be accepted and appropriate tax and excise duty needs to be collected. The Board Circular 150/01/2012-ST in the context of the meaning of the expression "gross amount" is also adverted to.
The Counsel appearing for M/s Sunil Hitech Engineers submitted that the adjudicating authority has imposed penalty of Rs.20.00 lakhs under the provisions of Section 77 of the FA 1994, which according to him, mandated, during the relevant period for imposition of penalty of Rs.1,000/- only.
The Revenue representative reiterated the order of the original authority and submitted that both the appellants should be put to strict conditions for hearing and disposing their appeals.
The Bench observed –
++ In our considered view, prima facie , the denial of the CENVAT Credit on the inputs which has gone into manufacturing of the said transformers cannot be upheld for the reason that the activity of manufacture of transformers is excisable and the excise duty liability has been discharged by the appellant.
++ Coming to the service tax liability we find that the appellant had discharged the service tax liability on the amount of the contract which has been executed by them for erection and commissioning the transformers which were cleared from their factory premises.
++ In our considered view, prima facie , the value of transformers cannot be included in such execution of works contract as there is no dispute that M/s. Sunil Hitech Engineers Ltd. had given them two separate contracts for supply of transformers and erection and commissioning of such transformers.
++ We also note that the tender as floated by MSEB/MSDEL sought quote for supply and erection and commissioning of transformers separately; but while awarding the tender to M/s. Sunil Hitech Engineers Ltd., we find that MSEB/MSDEL had infact executed three separate contracts i.e. one for supply of transformers; one for erection and commissioning of such transformers; one for civil construction required for erection and commissioning of such transformers. It is also noticed that the said M/s. Sunil Hitech Engineers Ltd. who bagged the contract had given back to back contract to appellant for supply of transformers and erecting and commissioning of the same and had given the civil construction contract to somebody else. Prima facie, we are of the view that the ratio of the judgment of this bench in the case of M/s. Essar Projects (India) Ltd. (supra) would apply and hence we hold that the all appellants have made out a prima facie case for waiver of the duties, interest and penalties confirmed by the adjudicating authority.
In fine, the Bench granted waiver of pre-deposit of the amounts involved and stayed the recovery.
(See 2014-TIOL-1004-CESTAT-AHM)
