Installation & Commissioning Of Goods After Sale Is Not “Works Contracts”; Service Tax Not Leviable: CESTAT

The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that installation and commissioning of goods after sale is not a “works contracts”, hence service tax is not leviable. The Bench of Binu Tamta (Judicial Member) and P.V. Subba Rao (Technical Member) has observed that “merely because the goods were installed and commissioned after sale, the contract would not become a works contract services.” In this case, the show cause was issued to the assessee/appellant as it was found that the assessee had sold DG sets to its customers and also erected, commissioned and installed them. It was felt that such contracts were composite contracts including the sale of the DG sets and rendering services of erection commissioning and installation which were, therefore, classifiable as a “works contract” on which service tax needs to be paid. Thereafter, the Additional Commissioner passed the order against the assessee which was upheld by the Commissioner (Appeals). The assessee has challenged the order passed by the Commissioner (Appeals) before the Tribunal. The assessee contended that the department had wrongly taken this contract for sale of goods as a “works contract service”. Merely because some incidental service such as installation and commissioning were also taken up by the assessee, it does not automatically mean that the assessee had rendered “works contract services”. According to the assessee it had only sold the DG sets had not rendered any service. It had, however, installed and commissioned them free of cost, therefore, there was no element of service. The department submitted that since the assessee had not only sold the DG sets but also installed and commissioned them, the nature of the contract is of works contract involving transfer of goods and provisions of service as well. The Tribunal opined that when a large equipment such as DG set is purchased, the customer naturally wants the seller to install and commission it so to necessary to ensure that the DG sets were in working order. Merely because the goods were installed and commissioned after sale, the contract would not become a works contract services. It is more or less like a refrigerator or air-conditioner bought by someone for home use. “The seller sells the refrigerator and also delivers and installs which satisfies the buyer that it is in good working condition. Therefore, the demand of service tax on the sale of generators by treating them as “works contracts” merely because the generators were also installed and commissioned by the appellant cannot be sustained and is liable to be set aside,” added the bench. In view of the above, the Tribunal allowed the appeal. Case Title: M/s Spain Electronics v. Commissioner (Appeals-I) Case Number: SERVICE TAX APPEAL NO. 50585 OF 2019 Counsel for Appellant/ Assessee: Vandana Singh Counsel for Respondent/ Department: Anand Narayan Click Here To Read/Download The Order

Installation & Commissioning Of Goods After Sale Is Not “Works Contracts”; Service Tax Not Leviable: CESTAT

Mehak Dhiman

Tags