The Ahmedabad Bench of the Customs, Excise and Service Tax Appeals Tribunal (CESTAT) ruled that the whole exercise is the sale of ready-mixed concrete (RMC) and that there is no service element involved so as to create a service tax liability to the against the appraised.
The bench of two members of Ramesh Nair (judicial member) and Raju (technical member) observed that the department accepted the appellant’s activity as manufacturing very well and collected the excise duty on the total value of the RMC, which includes the pumping and laying of the RMC on the site. As a result, the department cannot take two positions: one supporting the manufacturer’s claim for excise duty while demanding a service tax under the Works Contracts Act.
The appellant/reviewed is in the business of manufacturing RMC, which falls within heading 38245010 of the First Schedule to the Central Excise Tariff Act 1985. The assessee had paid its central excise debts on RMC’s production without using the Cenvat credit. While supplying their RMC, they also undertake the activity of laying the RMC at the buyer’s site using concrete pumping. When removing RMC from the factory, the appellant pays central excise duty. The assessee has entered into a contract with the buyer of RMC, which is a works contract which includes the supply of RMC and the installation of RMC on the buyer’s site.
The Ministry specifies that this is a mixed contract for the supply and installation of RMC under an employment contract and subject to the service tax. Upon examination of the form, it also appears that they have received rental income from the sale of tangible assets and legal services, for which they are liable for tax on services.
A show cause notice was issued and the order was made where it was held that the appellant’s activity, namely the supply of RMC to the buyer’s site, can be characterized as a contract service of work. Therefore, the service tax claim was upheld, and the service tax claim was also upheld for legal services under reverse charge under section 73 of the Finance Act 1994 Section 75 interest was charged and penalties imposed on the appellant.
The appellant argued that the contracts on which the service tax claim is confirmed relate to the supply and placement of concrete at the purchaser’s premises. The product, ready-mixed concrete, is subject to central excise. The goods have a very limited shelf life, so this product, if produced outside the buyer’s premises, must be transported and deposited at the place specified by the buyer, and therefore the cost of the product includes all incidental and ancillary service values on the main supply of ready-mixed concrete, and the appellant suffered central excise duty on the total value.
The department argued that the appellant and its client entered into an agreement for a works contract, which includes the supply of RMC as well as certain services such as the installation of RMC at the recipient’s site, and that it is therefore entitled to the service of a works contract.
The CESTAT found that the entire activity, from the manufacture of the RMC to the delivery to the customer’s site, is an activity subject to excise duty. Just because the contract indicates that it is an employment contract, the real nature of the transaction cannot be ignored. The appellant deals with the transaction of a works contract only with regard to the law on VAT.
The court, while allowing the appeal, held that RMC’s manufacturing activity could not be covered by a works contract by any stretch of the imagination. Therefore, even if there is a contract for works essentially for the purposes of the VAT law, it cannot be applied to the present transaction of manufacture and sale of goods under the terms of Article 2 (f) of the Central Excise Act 1944. The fully accepted the appellant’s manufacturing business and collected the excise duty on the full value of the RMC, which includes the pumping and laying of the RMC on the spot.
Case Title: Perfect Ready Mix v Central Excise Commissioner and ST, Vadodara
Reference: 2022-DB Service Tax Appeal No. 10059
Date: 14.11.2022
Counsel for the Appellant: Maître A. Banerjee
Counsel for the Respondent: Superintendent (AR) RP Parekh
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