IMPORTANT POINTS
(1) There can be two different taxes/levies under different heads by applying aspect theory – Same activity can be taxed as ‘goods’ and ‘services’ provided contract is indivisible and on aspect of services there may be levy of service tax.
(2) There is distinction between sale of goods and a contract of service.

JUDGMENT :

M.R. SHAH, J.

1. Feeling aggrieved and dissatisfied with the impugned judgment and order dated 02.05.2018 passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench at Mumbai (hereinafter referred to as the ‘CESTAT’) in Appeal Nos. ST/87589 and 87590/2013, by which the CESTAT has allowed the said appeals preferred by the respondent-M/s Suzlon Energy Limited (hereinafter referred to as the ‘respondent’) and has held that “Engineering Design and Drawings” of various models imported by the respondent for the purpose of manufacturing of Wind Turbine Generator (for short ‘WTG’) are not leviable to service tax under the category of “Design Services” as defined under Section 65(35b) read with Section 65(105)(zzzzd) of the Finance Act, 1994 during the period June, 2007 to September, 2010, the Revenue has preferred the present appeals.

2. That the respondent herein was providing various taxable services. The respondent was also in the manufacture of WTG. It has three subsidiary companies situated in Germany and Netherlands with whom product development and purchase agreement had been entered into.

2.1 The respondent had entered into an agreement dated 01.04.2007 (w.e.f. 01.01.2007) with M/s Suzlon Energy GmbH, Germany, a sister concern for the product development and purchase agreement to be used exclusively for manufacturing of WTG in the territory of India. The products were exclusively defined in Para 1.10 of the said agreement.

2.2 The respondent, while importing these designs filed Bill of Entry with the Custom authorities and classified the same as “Paper” under Chapter Sub-heading No. 49119920 of the Customs Tariff and claimed benefit of ‘Nil’ rate of customs duty under Notification No. 021/2002 for BCD and Notification No. 020/2006 for CVD. That respondent claimed that since the designs and drawings received by it vis customs route by filing the Bill of Entry were “goods” and not “services” it was not required to pay the service tax.

2.3 During the course of audit, it was noticed that the respondent had not paid service tax on “Engineering Design and Drawings” of various models, used in the manufacturing of WTG, which was classifiable under the category of “Design Services” for the period from June, 2007 to September, 2010.

2.4 The appellant herein - Commissioner of Customs, Central Excise and Service Tax, Pune issued a show cause notice dated 15.12.2001 to the respondent calling upon it to show cause as to why the service tax to the tune of Rs. 18,42,99,652/- on the value of taxable services provided by it under the provisions of Section 73 of Chapter V of the Finance Act and cess under Section 85 of Chapter VI of the Finance Act be not demanded. The respondent was also called upon to pay the interest leviable under Section 75 and penalty under Section 76 and 78 of the Finance Act. For the subsequent period , i.e. October, 2010 to September, 2011, another show cause notice was issued on 20.04.2012 demanding service tax of Rs. 3,36,28,515/- on the value of “design service” from M/s SEG and M/s Suzlon Blade Technology, Netherlands.

2.5 Vide Order-in-original dated 25.03.2012, the Commissioner – appellant herein confirmed the demands made in the show cause notices as provider of “design services” taxable under Section 65(105)(zzzzd) and in accordance with the definition of the services in Section 65(35b) of the Finance Act, 1994. The Commissioner also levied interest as well as the penalty.

2.6 Aggrieved by the Order-in-original passed by the Commissioner confirming the demands of service tax and also levying the interest and penalty, the respondent filed appeals before the CESTAT. By the impugned common order, the CESTAT has allowed the said appeals, relying upon its earlier decision in the case of Sojitz Corporation vs. Commissioner of Service Tax, New Delhi, 2009 (14) STR 642 (Tri. Delhi) and has held that the said design and drawings are “goods” and not “service.” The CESTAT has also observed and hel