BHAVIK TERRYAB Vs. COMMISSIONER OF C. EX.

JUDGEMENT

(1.) THE appellant imported textile machinery from Japan, Italy etc. under the cover of contract with foreign exporter and cleared the same on payment of duty on the entire value agreed upon between the seller and buyer. In terms of said agreement, installation and erection was to be done by the foreign supplier, who sent his technical persons to do the job. Revenue by entertaining a view that such erection, commissioning has been done by the foreign persons who did not have office in India, initiated proceedings against the appellant for confirmation of Service Tax. The said proceedings were initiated by way of issuance of show cause notice dated 19 -7 -2010 in respect of machinery imported during the period 2005 to 31 -3 -2009. During the adjudication, Commissioner dropped the demand for the period prior to 18 -4 -2006 but confirmed the Service Tax for the remaining period. As regards valuation of said services, he observed that the same cannot be determined separately in terms of contract and as such, recourse to Notification No. -S.T., dated 21 -8 -2003 and Notification No. -S.T., dated 1 -3 -2006 has to be taken for quantifying the value of the taxable service. He accordingly confirmed the demand of Service Tax of Rs. 37,35,730/ - along with imposition of penalty of identical amount under Section 78 of the Finance Act, 1994. In addition, penalties also stand imposed under Section 76 of the Finance Act.

(2.) Arguing on the stay petition, Shri K.K. Anand, learned advocate submits that apart from the fact that foreign exporters are having their office in India, in which case Service Tax liability would not fall upon the recipient of services, they have discharged the customs duty on the entire value of the textile machinery. If that be so, Commissioner was not justified in arriving at a deemed value of services included in the said contract value and to confirm Service Tax. He also submits that notification referred to by the Commissioner are optional notification granting abatement to the persons who is otherwise liable to pay the Service Tax. As such, this deemed arrival of the value of services in terms of said notification was neither warranted nor in accordance with the law. He also assails the demand on the point of limitation.

(3.) COUNTERING the argument learned DR submits that payment of Customs duty on the entire value of the goods has got nothing to do with the payment of Service Tax under the category of installation, erection and commissioning. Two duties are separate duties and the appellant is liable to pay Service Tax on that part of value of contract which relates to the services provided by the foreign persons. He further submits that adjudicating authority was correct in arriving at the value of services in terms of said notification. He accordingly, prays for directing the applicant to deposit the Service Tax amount.