Power Machines India Ltd Vs Commissioner Service Tax (CESTAT Delhi)
The Central Excise and Service Tax Appellate Tribunal (CESTAT) Delhi recently delivered a significant verdict in the case of Power Machines India Ltd. vs. Commissioner Service Tax. The case revolved around the demand for service tax on Goods Transport Agency (GTA) Service for the period 2007-2008 to 2011-2012. CESTAT Delhi set aside the service tax demand due to insufficient evidence proving that GTA services were provided to NTPC.
1. Background and Allegations: Power Machines India Ltd., a subsidiary of OJSO Power Machines, Russia, provides various services related to power generation plants, including Erection and Commissioning of turbine generators, Management Maintenance and Repair Services, and Consulting Engineer Services. The appellant was registered with the service tax department for specific services and was also registered as a service recipient under “Transport of Goods by Road” Service.
2. Legal Framework: The case involved a key provision in the Service Tax Rules, 1994, which stipulates that, in certain cases, the service recipient is liable to pay service tax instead of the service provider. This provision applies when the service is provided by a Goods Transport Agency (GTA) to specific entities, including corporations established by law.
3. Contract Structure: Power Machines India Ltd. had entered into contracts with National Thermal Power Corporation Limited (NTPC) for setting up Super Thermal Power Projects. These contracts were divided into three sub-contracts, including one for transporting equipment to the project site. Under this sub-contract, the appellant invoiced NTPC at a fixed percentage of the equipment’s sale value, irrespective of the actual transportation cost.
4. Service Tax Demand: Three show-cause notices were issued to the appellant, demanding service tax on the 2% transportation charges collected from NTPC. The demand was confirmed in the impugned order, leading to the appeal.
5. Grounds of Appeal: The appellant contested the demand on various grounds, including:
