Voestalpine VAE VKN India Pvt. Ltd. Vs Commissioner of Central Excise (CESTAT Delhi)
Introduction: The recent case of Voestalpine VAE VKN India Pvt. Ltd. vs. Commissioner of Central Excise sheds light on the exemption of service tax related to the construction, commissioning, or installation of original works pertaining to the Delhi Metro project. The appellant, engaged in various industrial activities, filed an appeal seeking to overturn the Commissioner (Appeals) decision that set aside the earlier order allowing the refund claim. This article explores the case details, the relevant exemption notification, and the reasoning behind the decision.
Background: Voestalpine VAE GMBH received an order from Delhi Metro Railway Corporation for the supply of Gauge Turnouts (Railway Track items) on a ‘Delivery Duty Paid’ basis for its Jaipur and Faridabad metro projects. To fulfill the contract, V.V.G. awarded the machining of rails/crossing to Voestalpine VAE VKN India Pvt. Ltd. Initially, the appellant paid service tax, but later realized it was exempted under Notification No. 25/2012-ST .
Exemption Notification: The crucial part of the case revolves around Entry No. 14 of the exemption notification dated 20.06.2012. It states that services by way of construction, erection, commissioning, or installation of original works pertaining to an airport, port, railways, including monorail or metro, are exempt from service tax.
Refund Claim and Initial Decision: The appellant filed a refund claim after paying service tax of Rs. 3,24,326. The Assistant Commissioner, after careful examination, granted the refund, considering that the appellant supplied services crucial for the commissioning or installation of original works pertaining to the Delhi Metro.
Appeal and Commissioner’s Decision: The Commissioner (Appeals) set aside the refund order, arguing that the appellant did not provide services directly to Delhi Metro but to Voestalpine VAE GMBH. The Commissioner emphasized that the services provided were only a part of the commissioning or installation process, and machining of rails could not be considered as providing service in this context.
Court’s Ruling: The court, however, disagreed with the Commissioner (Appeals) and upheld the initial order. It clarified that the appellant’s services, even if provided to a foreign entity, were still considered as services to Delhi Metro. The court also rejected the notion that only the entirety of commissioning or installation qualified for the exemption, stating that the critical factor was whether the services pertained to the metro project.
Conclusion: The court’s decision reaffirms that services linked to the construction, commissioning, or installation of original works pertaining to the Delhi Metro project are exempt from service tax under Entry No. 14 of the exemption notification. This case sets a precedent for similar situations, emphasizing the importance of understanding the scope of exemption notifications and ensuring that services directly or indirectly contributing to qualifying projects are considered for tax benefits.
FULL TEXT OF THE CESTAT DELHI ORDER
The appellant M/s Voestalpine VAE VKN India Pvt. Ltd.1 has filed this appeal for setting aside the order dated 26.12.2016 passed by the Commissioner (Appeals). This order of the Commissioner (Appeals) sets aside the order dated 19.10.2015 passed by the Assistant Commissioner allowing the refund claim filed by the appellant.
2. The appellant is engaged in the business of forgers, fabricators, manufacturers, importers, exporters of and dealers in industrial fasteners, machine tools, agricultural implements, railway track fittings and fasteners and other such products.
3. M/s Voestalpine VAE GMBH2 had received an order from Delhi Metro Railway Corporation, New Delhi3 for supply of Gauge Turnouts (Railway Track items) on „Delivery Duty Paid‟ basis for its Jaipur and Faridabad metro projects.
4. The appellant is a subsidiary of V.V.G. In order to execute the contract with Delhi Metro, V.V.G. awarded the contract to the appellant for machining of rails/crossing so that the same could be supplied and used for laying the railway track. Initially the appellant had paid service tax amounting to Rs. 3,24,326/-, but when it realised that payment of service tax was exempted by a Notification No. 25/2012-ST dated 20.06.20124 under Entry No. 14, it filed a refund claim in Form – R under section 11B of the Central Excise, Act, 1944 read with section 83 of the Finance Act, 1994 on 10.04.2013. The details of the related invoices and the amount of service tax paid are as follows :-
