Xomox Sanmar Ltd. Vs Commissioner of GST and Central Excise (CESTAT Chennai)
Summary: M/s. Xomox Sanmar Ltd. was engaged in manufacture of industrial valves, valve actuators, enclosed gears and other engineering products and also rendered engineering-related services to M/s. Xomox International GmbH & Co., Germany (“Xomox Germany”) concerning goods manufactured by M/s. Sanmar Foundries Limited, Viralimalai (“SFL”). It received USD 2,000 per month in convertible foreign exchange and treated the receipts as export of services. Two connected Service Tax Appeals were before the CESTAT Chennai: ST/41517/2016, covering April 2009 to March 2014, and ST/42199/2016, covering April 2014 to March 2015. The first demand was Rs.6,91,329/- and the second was Rs.14,476/-, besides interest and penalties.
The Department classified the activity as Technical Inspection and Certification Service, relying particularly on inspection and quality-related work performed at SFL. The appellant contended that the contractual assignment was substantially broader engineering work and relied on contemporaneous documents, including the job description, emails, Debit Note No.009 dated 31.12.2007 describing the consideration as “Service Engineer Charges”, the letter dated 29.02.2008 to the Central Excise Audit authorities, and the letter dated 05.05.2009 from Xomox Germany confirming USD 2,000 per month towards engineering services.
On classification, the Tribunal examined the substance of the contracted and actually rendered service. The job description covered “Engineering”, “Development”, “Quality” and “Dispatch”. It included drawing release, clarification, translation and correction, dimension deviations and modifications, technical issues, development and rectification of castings and patterns, material specifications, PED requirements, inspection plans, corrective-action reporting, packing and dispatch-related technical assistance. The Tribunal found that inspection was only one component of a wider engineering assignment. There was no separate inspection charge and no evidence that Xomox Germany had engaged the appellant as an independent inspection or certification agency. The Tribunal distinguished Commissioner of Central Excise, Mangalore v. SGS India (Pvt.) Ltd., 2010 (17) S.T.R. 92 (Tri.-Bang.), because that decision concerned an activity whose essential character was inspection, examination and certification. The services here were held to be engineering advice, consultancy and technical assistance. For the period up to 30.06.2012, they were classifiable as Consulting Engineer Service under Section 65(105)(g) read with Section 65(31) of the Finance Act, 1994; for the later period, the nature of the activity continued to be engineering service under the then-applicable statutory framework.
