Case Law Details

Case Name : Hinduja Foundries Ltd. Vs Commissioner of Service tax, Chennai (CESTAT Chennai)
Appeal Number : Final Order Nos. 271 to 273 of 2012
Date of Judgement/Order : 20/03/2012
Related Assessment Year :
Courts : All CESTAT (1011) CESTAT Chennai (138)


Hinduja Foundries Ltd.


Commissioner of Service tax, Chennai

Final Order Nos. 271 to 273 of 2012

Stay order NoS. 154 to 156 of 2012

Application Nos. ST/S/60 to 62 of 2012

Appeal Nos. ST/87 TO 89 OF 2012

March 20, 2012


S.S. Kang, Vice-President – Heard both sides.

2. The appellants have filed this application for waiver of pre-deposit of service tax amounting to Rs. 3,85,06,982, interest and penalty. Demand is confirmed on the ground that the appellants provided Design Service, which is taxable under the Finance Act and had not paid the service tax.

3. The contention of the appellants is that they were receiving orders for manufacture and supply of castings, as well as, patterns for castings. For manufacture of patterns for castings, the appellants also are preparing design and drawing on the basis of which the patterns are being made. The contention is that the cost of design and drawing are added to the assessable value of patterns as well as to castings when cleared on payment of appropriate duty. As the cost of design and drawing have already been added to the assessable value of the goods manufactured and appropriate duty has been paid, therefore, the demand of service tax in respect of design is not sustainable.

4. The appellants also pleaded that the impugned order was passed in violation of the principles of natural justice as an opportunity to produce the relevant records were not granted by the adjudicating authority. The learned counsel for the appellants also submitted that the appellants have evidence to show that the cost of drawing and design is added to the assessable value of the patterns/castings and appropriate duty has been paid. For producing this evidence the appellants have sought time before the adjudicating authority and this contention was not considered while passing the impugned order.

5. The learned JCDR for the Revenue submitted that the appellants are raising separate invoices for cost of designs to the customers. Therefore as the appellants are receiving consideration separately for the development of designs from their customers. As per the provisions of Finance Act, the Design Service provided in relation to design of industrial products is liable to pay service tax. It is also submitted that there is no evidence on record to show that the cost of design and drawing are added to the assessable value of the goods. Therefore, the demand of duty is rightly made.

6. The definition of Design Service as provided under section 65(36b) of the Finance Act is reproduced below:

“design services” includes services provided in relation to designing of furniture, consumer products, industrial products, packages, logos, graphics, websites and corporate identity, designing and production of three dimensional models.”

From the records, we find that the appellants are charging their customers separately for designing charges under invoices.

7. At this stage, learned counsel appearing on behalf of the appellants volunteered to deposit a sum of Rs.50 lakhs for hearing of the appeals. In view of the offer made, we direct the appellants to deposit an amount of Rs.50 lakhs (Rupees Fifty lakhs only) within a period of 8 weeks from today. On such deposit pre-deposit of the remaining dues shall remain waived and recovery thereof stayed during the pendency of the appeal.

8. From the records, we find that the appellants made a request before the adjudicating authority for an opportunity to produce evidence to show that the cost of design and drawing are included in the assessable value of patterns/castings and appropriate duty is paid. This contention has not been taken into consideration by the adjudicating authority.

9. In view of the above, the impugned orders are set aside and the matter is remanded to the adjudicating authority to decide the matter afresh upon showing the proof of deposit of the amount so directed and after giving adequate opportunity of hearing to the appellants. Both the sides are at liberty to produce evidence in support of their claims.


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