Commissioner of Customs, Central Excise & Service Tax Vs Suzlon Energy Ltd. (Supreme Court of India)
Whether custom made design imported on a blue print is goods and thus not liable for payment of service tax under the head design services?
The Supreme Court was considering service tax demand for the period June 2007 to September 2010 when the design services were received by the respondent Suzlon from its associate enterprise and it was claimed that as the same was imported on a paper and it was held to be goods under the Customs Act, the same was not liable for service tax payment. The Department contended that following BSNL’s case when the goods and services are imported under a composite contract, then the intention of parties is relevant as to whether the parties intended to transfer of both goods and services , either seperately or in an divisible manner or in a composite manner.
As observed by this Court in the case of BSNL (supra), there is a distinction between the sale of goods and a contract of service. What is relevant is the intention of the contracting parties and whether the contracting parties intend transfer of both goods and services, either separately or in an indivisible manner or in a composite manner. The issue is squarely covered by the decision of this Court in the case of BSNL(supra) against the assessee and in favour of the revenue. Therefore, the view taken by the CESTAT that the same activity cannot be taxed as goods and services is absolutely erroneous.
As observed hereinabove, the definition of “design services” is very clear and it is wide enough to cover all “design services.” Merely because “Engineering Design & Drawings” prepared and supplied by sister company were shown as ‘goods’ under the Customs Act and in the bill of entry, by that itself cannot be a ground to take such services out of the definition of “design services” under the Finance Act, 1994.
The impugned judgment and order passed by the CESTAT holding that the respondent is not liable to pay service tax as “design services” on importing various models of “Engineering Design & Drawings” for the purpose of manufacturing of Wind Turbine Generator (WTG), as defined under Section 65(35b) r/w section 65(105)(zzzzd) of the Finance Act, 1994 is hereby quashed and set aside.
Several examples like hospital supplying stent while performing a heart operation, a painter specially painting on canvass as per directions etc were given which heavily weighed in the minds of Ld Judges and it was thus held that the declaration in bill of entry as goods and acceptance under the Customs cannot be determinative of transaction and the import of design and drawings in a paper was import of service liable for service tax under the applicable provisions.
This judgement is an important judgement which will be helpful in dealing with Customs, excise and GST Cases also.
