Commissioner of Customs and Central Excise Vadodara – I Versus M/s Jyoti Limited and Ors

Commissioner of Customs and Central Excise  Vadodara – I Versus M/s Jyoti Limited and Ors

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले


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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 4721 – 4723 of 2008
Commissioner of Customs and Central Excise 
Vadodara – I        .. Appellant
Versus
M/s Jyoti Limited and Ors.          .. Respondents
J U D G M E N T
M. R. Shah, J.
1. Feeling   aggrieved   and   dissatisfied   with   the   impugned
common judgment and order passed by the Customs, Excise
and   Service   Tax   Appellate   Tribunal,   Ahmedabad   passed   in
orders in Appeal Nos. 3085 to 3087 of 2007 by which the
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learned Tribunal has allowed the said appeals preferred by the
respondent assessee (by a majority) and set aside the demand
of duty and penalty as per the Revisional Authority’s order, the
Revenue has preferred the present appeals.
2. The dispute is with respect to the period July, 1997 to
December, 2000.  A show cause notice dated 04.06.2001 was
issued against the respondent – assessee, proposing demand
of   duty   (service   tax   demand)   of   Rs.1,84,75,749/­   and
proposing the imposition of penalty on the grounds, inter alia,
that the assessee is providing the services to its customers as
consulting engineer and therefore liable to pay the service tax.
2.1 At   this   stage,   it   is   required   to   be   noted   that   the
respondent   ­   assessee   company   was   engaged   in   the
manufacture of  mechanical, engineering and electrical goods
falling under Chapters 84 and 85 of Central Excise Tariff Act,
1985. In respect of certain buyers, the assessee merely sold
their products. In respect of certain buyers, at their request,
the assessee had undertaken, at the customer's site, certain
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activities like construction, civil works including installation,
erection   and   commissioning   of   machinery   to   the   specific
requirements of the customers.  They collected amounts billed
variedly as charges towards erection, testing and calibrations,
installation and commissioning, construction activities etc. In
respect of some other buyers, they procured some accessories
and miscellaneous goods from other manufacturers or open
market   and   in   such   cases   collected   the   price   from   their
customers for supply of the said bought out items.  According
to   the   Revenue   the   assessee   collected   a   sum   of
Rs.36,95,14,983/­towards post clearing activities relating to
the aforesaid period on which the assessee was liable to pay
the service tax of Rs.1,84,75,749/­.   The original authority
dropped the show cause notice on considering the various
contracts   and   opined   that   the   services   rendered   by   the
assessee cannot be said to be rendering services of consulting
engineering.
2.2 The Commissioner took up the order by way of suo moto
revision and held that the services rendered by the assessee
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can   be   said   to   be   rendering   of   services   of   the   nature   of
"advice",   "consultancy"   or   "technical   assistance"   while
executing the works contract and therefore can be said to be
services   of   consulting  engineer   and   were   liable   to  pay   the
service tax.
2.3 The order passed by the Commissioner was the subject
matter of appeals before the learned Tribunal.   There was a
difference of opinion between the members of the Tribunal.
The Member (Technical) confirmed the demand of duty and
interest and also the penalty.  However, the Member (Judicial)
disagreed with the view taken by the Member (Technical) and
was of the opinion that the Deputy Commissioner was justified
in dropping the proceedings/show cause notice/demand.  The
matter was referred to the third member.  The third member
opined to set aside the order passed by the Commissioner in
suo moto revision and held that the services rendered by the
assessee cannot be said to be services rendered as Consulting
Engineer and therefore not liable to pay the service tax.
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2.4 Feeling   aggrieved   and   dissatisfied   with   the   majority
view/decision   of   the   Tribunal   holding   that   the   services
rendered by the assessee cannot be said to be Consulting
Engineer and therefore the assessee is liable to pay service
tax, the Revenue has preferred the present appeals.
3. We have heard Shri A.K. Panda, learned Senior Advocate
appearing on behalf of the Revenue and Mrs. Nisha Bagchi,
learned   Advocate,   appearing   on   behalf   of   the   assessee   ­
respondents.     We   have   gone   through   and   considered   the
Order­in­Original   passed   by   the   Deputy   Commissioner
dropping the demand and show cause notice as well as the
order   passed   by   the   learned   Commissioner   passed   in
Revision/Review and also the impugned orders passed by the
Tribunal.
4. Having   gone   through   the   order   passed   by   the
Commissioner confirming the demand of service tax it appears
that the Commissioner confirmed the demand of service tax
merely on the ground that services rendered by the assessee
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can be said to be services rendered as Consulting Engineer
and   therefore   liable   to   pay   the   service   tax.     However,
considering the various services rendered by the assessee like
erection/installation/commissioning   of   goods   at   customers’
site and incidentally they may also be providing the services of
drawing,   design   etc.,   it   cannot   be   said   that   the   services
rendered by the assessee was as a consulting engineer.  The
contract   can   be   said   to   be   ‘works   contract’.     Hence,   the
assessee cannot be said to be rendering the services as a
consulting engineer and therefore liable to pay the service tax.
Therefore, once, the assessee at the relevant time cannot be
said to be consulting engineer and/or rendering services as a
consulting engineering the assessee is not liable to pay the
service tax on the ‘works contract’ or the contract rendering
services   as   consulting   engineer   for   the   period   under
consideration namely July, 1997 to December, 2000.  No error
has been committed by the learned Tribunal in setting aside
the   order   passed   by   the   Commissioner   and   restoring   the
Order­in­Original   passed   by   the   Deputy   Commissioner
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dropping the show cause notice and demand of service tax and
penalty considering the nature of services rendered by the
assessee.  We are in complete agreement with the view taken
by the Tribunal.
4.1 In   view   of   the   above   discussion   and   for   the   reasons
stated above all the appeals filed by the Revenue fail and the
same deserve to be dismissed and are accordingly dismissed.
In the facts and circumstances of the case, there shall be
no order as to costs.
…………………………………J.
            (M. R. SHAH)
…………………………………J.
    (B.V. NAGARATHNA)
New Delhi, 
August 24, 2022

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