By TIOL News Service

MUMBAI, NOV 03, 2014: THE appellant is aggrieved with the order of CCE, Raigad demanding service tax (& appropriating the amount paid) along with interest and penalties on their activities by classifying them under the category of "Technical Inspection and Certification service".

Revenue is also in appeal against this order and this is with regard to dropping the demand of service tax on the other activity sought to be classified in the SCN as "Storage and Warehousing service".

The facts involved are as under -

++ The appellants are engaged in manufacture of body building of buses, trucks etc.& also undertake repair, maintenance and servicing of commercial vehicles. M/s. Tata Motors Ltd. (TML) sent vehicles, after manufacturing, to the appellant under a works order for performing activities such as pre-delivery inspection and preventive treatment (P.T.) before exporting them.

++ The appellant after conducting inspection and taking rectification action as recorded in the vehicle data sheets send the vehicles back to TML for export.

++ This activity, the appellant contends,is not covered under the "Technical inspection and certification service" whereas the Commissioner thinks otherwise and, therefore, he confirmed the demand of duty.

++ On the second issue covered by the Revenue appeal, the appellant had given open land to enable TML to park the vehicles received from various locations for general checking and inspection by appellant; they charged TML rental for this purpose; arranged for security service by security agency. Charges incurred for security and telephone expenses were reimbursed by TML to appellant. However, the insurance of vehicles was arranged directly by TML. The diesel filled in the vehicle tanks was also reimbursed by TML. The allegation in the SCN that this activity tantamount to Storage and Warehousing service was dropped by the CCE, Raigad holding that the appellant had not provided any management and safe keeping for the vehicles to warrant classification under the proposed entry.

Before the CESTAT the appellant submitted that -

++ Only standard checks of the vehicles were conducted by them as detailed in the vehicle data work sheets of job cards. These data sheets indicated that the vehicles are checked for mechanical parts, electrical parts, leakages, body fitments paints etc. According to them, by no stretch of imagination can this activity be covered under the "technical inspection and certification" service. In fact, all the vehicles are technically inspected and certified for export by the Technical Inspection Agency namely VERITAS.

++ They do not issue any certificate similar to one issued by a Certification Agency. In any case the servicing of heavy vehicle such as trucks being not one of the specified categories of motor vehicles is outside the scope of service tax as clarified by the Board vide Circular No.96/7/07-ST dt.23.8.2007 [Reference code 036.02 / 23.08.07] .Demand is also time barred.

++ On the issue of parking/storage of vehicles, it was stressed that they have only rented out space to TML who reimbursed security and telephone charges. They do not perform inventory management and insurance activity so as to get covered under 'storage and warehousing' service.

The AR justified confirmation of the demand and as for the Revenue appeal adverted to the CBEC Circular F.No. B.II/1/2002/TRU dt. 1.8.2002 wherein it was clarified that the essential test for classifying an activity as storage and warehousing is whether the storage keeper provides for security of goods, stacking, loading, unloading etc.

The Bench referred to the definition of "Technical Inspection and Certification"and after going through the work order issued by TML and the action taken by the appellant (work sheets) observed -

++ The rectification job of these defects certainly seems to be activities conducted by any vehicle repair shop. If the argument of Revenue is accepted, every motor garage will become a technical inspection and certification agency. This would lead to a ridiculous situation. Revenue appears to have misread the meaning of technical inspection and certification.

++ The kind of certification covered under the definition refers to certification to ensure that characteristics of the goods meet specified standards. The standards may relate to functionality, utility, quality or safety. The definition of technical inspection cannot be read to mean that any checks on functionality, safety etc. would amount to technical inspection and certification. The word "technical inspection and certification" would appropriately refer to certain standards laid down in some statute or some guidelines.

++ In the present case the job card or vehicle data sheets clearly indicate that AGPL are merely rectifying/replacing some damaged/defective parts etc. By no stretch of imagination can this activity be termed as technical inspection and certification.

The order-in-original confirming the demand of duty on the activities undertaken by the appellant was set aside.

In the matter of the Revenue appeal, the Bench referred to the Board Circular cited by the AR and observed that none of the ingredients which are essential part of 'warehousing and storage service' are fulfilled so as to cover the activity of the appellant under this service and consequently agreed with the findings of the Commissioner.

In fine, the appeal of the appellant was allowed with consequential relief and the Revenue appeal was rejected.

(See 2014-TIOL-2171-CESTAT-MUM)