COMMISSIONER OF CUSTOMS, CENTRAL EXCISE & SERVICE TAXversusM/S SUZLON ENERGY LTD.

324                      [2023]REPORTS
               SUPREME COURT    4 S.C.R. 324                [2023] 4 S.C.R.


A         COMMISSIONER OF CUSTOMS, CENTRAL EXCISE &
                         SERVICE TAX
                                        v.
                         M/S SUZLON ENERGY LTD.
B                    (Civil Appeal Nos. 11400-11401 of 2018)
                                 APRIL 10, 2023
               [M. R. SHAH AND KRISHNA MURARI, JJ.]
            Finance Act, 1994 – ss.65(35b), 65(105)(zzzzd) – “design
      services” – Respondent engaged in manufacture of Wind Turbine
C
      Generator (WTG), entered into a product development and purchase
      agreement with its sister concern in Germany for manufacturing
      WTG in India – Various models of “Engineering Design &
      Drawings” were imported by the respondent for manufacturing of
      WTG – If leviable to service tax under the category of “design
D     services” as defined u/s.65(35b) r/w s.65(105)(zzzzd) – Held: Yes –
      Definition of “design services” is very clear and wide enough to
      cover all “design services” – Merely because “Engineering Design
      & Drawings” prepared and supplied by sister company of the
      respondent were shown as ‘goods’ under the Customs Act and in
      the bill of entry, that by itself cannot be a ground to take such
E
      services out of the definition of “design services” under the 1994
      Act – View taken by the CESTAT that the same activity cannot be
      taxed as goods and services is absolutely erroneous – Impugned
      judgment and order passed by the CESTAT setting aside the levy of
      service tax is quashed and set aside – However, matter remitted
F     back to the CESTAT to consider the grounds raised on behalf of the
      respondent.
            Tax/Taxation:
             Aspect theory – Application of – Held: There can be two
      different taxes/levies under different heads by applying the aspect
G     theory – The same activity can be taxed as ‘goods’ and ‘services’
      provided the contract is indivisible and on the aspect of services
      there may be levy of service tax.
            Sale of goods and a contract of service – Distinction – Held:
      There is a distinction between the sale of goods and a contract of
H     service – What is relevant is the intention of the contracting parties.
                                       324
 COMMISSIONER OF CUSTOMS, CENTRAL EXCISE & SERVICE                     325
           TAX v. M/S SUZLON ENERGY LTD.

      Disposing of the appeals, the Court                              A
      HELD: The designs were to be exclusively used by the
respondent in the territory of India and it was a tailormade design.
The respondent engaged the sister concern M/s SEG for the
activity of “Engineering Design & Drawings” used in
manufacturing of WTG, that was reduced as blue print on paper          B
and delivered to the respondent on the same medium. Such
“designs” were subjected to the service tax even as per the
clarification by the Board dated 18.03.2011 on the issue of
applicability of indirect taxes on packaged software. Therefore,
as such, the respondent was liable to pay service tax on the
“design services” received from abroad under reverse charge.           C
M/s SEG was a related unit, i.e. subsidiary of the assessee and
the amount received for service by M/s SEG from the assessee-
respondent for the said “Engineering design & drawings” services
therefore was liable to service tax under reverse charge in terms
of the concept of ‘associated enterprise’. Despite this, M/s SEG       D
raised the invoice/bill on the assessee treating it as ‘paper’.
However, when the said bill of entry was presented treating the
same as ‘paper’ for which the duty payable was ‘Nil’. Therefore,
neither any custom duty was paid due to exemption from payment
of duty treating it as ‘paper’ nor the service tax was paid. By a
detailed judgment and order, the Commissioner held that the            E
respondent was liable to pay the service tax under taxable
category ‘“design services”. However, by the impugned judgment
and order, the CESTAT has held that the respondent is not liable
to pay the service tax under “design services” under the Finance
Act, 1994 mainly on the ground that the custom authority               F
considered the same as ‘goods’ and therefore the same activity
cannot be taxed as ‘goods’ and ‘services’. The aforesaid view is
absolutely erroneous. There can be two different taxes/levies
under different heads by applying the aspect theory. The same
activity can be taxed as ‘goods’ and ‘services’ provided the
contract is indivisible and on the aspect of services there may be     G
levy of service tax. The aforesaid aspect has not at all been
considered by the CESTAT while passing the impugned judgment
and order. 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               H
326            SUPREME COURT REPORTS                      [2023] 4 S.C.R.


A     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. Even otherwise, 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
B
      the contracting parties intend transfer of both goods and services,
      either separately or in an indivisible manner or in a composite
      manner. The view taken by the CESTAT that the same activity
      cannot be taxed as goods and services is absolutely erroneous.
      The impugned judgment and order passed by the CESTAT setting
C     aside the levy of service tax is unsustainable and the same
      deserves to be quashed and set aside. [Paras 7-9][335-F-H; 336-
      A-G; 337-A]
            BSNL v. Union of India (2006) 3 SCC 1 : [2006] 2
            SCR 823 – relied on.
D           Sojitz Corporation v. Commissioner of Service Tax, New
            Delhi 2009 (14) STR 642 (Tri. Delhi); Hindustan
            Shipyard Ltd. v. State of A.P. (2000) 6 SCC 579 : [2000]
            1 Suppl. SCR 592; Associated Cement Companies Ltd.
            v. Commissioner of Customs (2001) 4 SCC 593 : [2001]
E           1 SCR 608; Tata Consultancy Services v. State of A.P.
            (2005) 1 SCC 308 : [2004] 5 Suppl. SCR 1040 –
            referred to.
                            Case Law Reference
      [2006] 2 SCR 823              relied on             Para 3.3
F
      [2000] 1 Suppl. SCR 592       referred to           Para 4.2
      [2001] 1 SCR 608              referred to           Para 4.3
      [2004] 5 Suppl. SCR 1040      referred to           Para 4.5
            CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 11400-
G     11401 of 2018.
            From the Judgment and Order dated 02.05.2018 of the Custom
      Excise Service Tax Appellate Tribunal, West Zonal Bench at Mumbai in
      AN Nos. 87589 and 87590 of 2013.

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 COMMISSIONER OF CUSTOMS, CENTRAL EXCISE & SERVICE                          327
           TAX v. M/S SUZLON ENERGY LTD.

      N. Venkataraman, ASG, Rupesh Kumar, V. Chandra Shekhar                A
Bharthi, Ms. Priyanka Das, Mukesh Kumar Maroria, Advs. for the
Appellant.
      V. Sridharan, Sr. Adv., Ms. Charanya Lakhmikumaran, Sahil
Parghi, Vinay Kumar Jain, Ms. Apeksha Mehta, Aditya Bhattacharya,
Ms. Monica Kasturi, Advs. for the Respondent.                               B
      The Judgment of the Court was delivered by
      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        C
Tax Appellate Tribunal, West Zonal Bench at Mumbai (hereinafter referred
to as the ‘CESTAT’) in Appeal Nos. ST/87589 & 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 & Drawings” of various models
imported by the respondent for the purpose of manufacturing of Wind         D
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.                                                            E
       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.                                                                       F
       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
                                                                            G
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/
                                                                            H
328            SUPREME COURT REPORTS                           [2023] 4 S.C.R.


A     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
B     had not paid service tax on “Engineering Design & 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
C     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
D     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,
E     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)
F     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
G     common order, the CESTAT has allowed the said appeals, relying upon
      its earlier decision in the case of Sojitz Corporation v. Commissioner
      of Service Tax, New Delhi, reported in 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 held that the taxation
      of goods and that of services are mutually and explicitly conceived levies,
H     and therefore the same activity cannot be taxed as goods and as services.
 COMMISSIONER OF CUSTOMS, CENTRAL EXCISE & SERVICE                            329
    TAX v. M/S SUZLON ENERGY LTD. [M. R. SHAH, J.]

Consequently, the CESTAT has set aside the Order-in-original on the           A
ground that “drawing and design” are to be treated as goods and therefore
it cannot be treated as service.
      2.7 Feeling aggrieved and dissatisfied with the impugned common
order passed by the CESTAT, the Revenue has preferred the present
appeals.                                                                      B
       3. Shri N. Venkataraman, learned Additional Solicitor General of
India appearing on behalf of the Revenue has submitted that the substantial
question of law arises for the consideration of this Court is, “whether
“Engineering Design & Drawings” of various models imported by the
respondent for the purpose of manufacturing of WTG are leviable to            C
service tax under the category of “Design Services” as defined under
section 65(35b) r/w section 65(105)(zzzzd) of the Finance Act, 1994
during the period June, 2007 to September, 2010?
        3.1 Shri N. Venkataraman, learned ASG has submitted that the
contentions of the respondent that any intellectual property put in a media   D
at all times would only get classified as ‘goods’ and never as ‘services’
may not be the correct statement of law. It is submitted that merely
because the intellectual property put in a media, it would not per se
make them goods. It would depend on whether the contracting parties
have understood it as a transfer or a sale of goods. It is submitted that
importation of a set of tailor made or readymade drawings will constitute     E
a sale of goods, whereas if a person engages a painter to draw a picture
of his choice and to his specifications and the delivery of the painting,
even though on a canvas duly framed, may only constitute to a service,
since the painter has engaged his entire intellectual effort in drawing the
painting for a particular customer and to his specifications and as he        F
progresses with the painting, the same is for a specific customer.
      3.2 It is submitted that this can also happen in the case of “designs
& drawings”. It is submitted that a set of tailor made drawings and
designs or readymade drawings and designs would constitute a distinct
clause when compared to preparation of drawings and designs under a           G
contract of service for a specific customer to suit his specifications.
       3.3 Shri N. Venkataraman, learned ASG has heavily relied upon
the decision of this Court in the case of BSNL v. Union of India, reported
in (2006) 3 SCC 1 (paras 44 & 45), in support of his submission on the
distinction between sale of goods and a contract of service. On the
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330            SUPREME COURT REPORTS                            [2023] 4 S.C.R.


A     decision of this Court in the case of BSNL (supra) and the distinction
      between sale of goods and a contract of service, Shri N. Venkataraman
      has made the following submissions:
            a) it held that sale in the conventional sense would mean the
            Gannon Dunkerly test and, deemed sale involving both goods and
B           services would be limited only to a work contract and food contract;
            b) It made it clear that Article 366(29A) does not give a license to
            assume that a transaction is a sale and then to look around for
            what could be the goods. This would be an incorrect approach
            since the expression goods had not been altered by the 46th
C           amendment and the ingredients of sale continues to have the same
            definition;
            c) However, this does not mean that the content of the concepts
            remain static, and the Courts must move with times;
            d) It proceeded to hold that Article 366(29A) does not seek to
D           cover hospital services, lawyer services and other professional
            services, where during the course of rendering such services, there
            may be a transfer of goods;
            e) Treatment of a patient in a hospital and administration of pills in
            the course of a treatment would not tantamount to sale;
E
            f)When a doctor writes out and hands over a prescription or a
            lawyer drafts a document and delivers it to his/her client, strictly
            speaking, with a payment of fees, consideration does not pass
            from the patient or client to the doctor or lawyer for the documents
            in both the cases;
F
            g) However, these are mere services and do not involve a sale for
            the purposes of Entry 54 List 2;
            h) The reason is that ultimately one has to apply the Gannon
            Dunkerly test. If there is an instrument of contract which may be
            composite in form, in any case other than the exceptions in Article
G           366(29A), unless the transaction in truth represents two distinct
            and separate contracts and is discernible as such, then the State
            would not have the power to separate the agreement to sell from
            the agreement to render service and impose tax on sale;

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 COMMISSIONER OF CUSTOMS, CENTRAL EXCISE & SERVICE                              331
    TAX v. M/S SUZLON ENERGY LTD. [M. R. SHAH, J.]

      i) The test, therefore, for service contracts, other than the two         A
      contracts falling under Article 366(29A), would be ‘did the parties
      have in mine or intend separate rights arising out of the sale of
      goods? If there was no such intention, there is no sale even if the
      contract could be disintegrated.’; and
      j) The test for deciding whether a contract falls into one category       B
      or another is, as what is the substance of the contract otherwise
      called, the dominant nature test.
        3.4 It is submitted that therefore what is required to be considered
is, did the contracting parties intend transfer of both goods and services,
either separately or in an indivisible manner or in a composite manner.         C
      3.5 Shri N. Venkataraman, learned ASG has also submitted the
following illustrations in support of his submission that the “Engineering
Design & Drawings” of various models imported by the respondent for
the purpose of manufacture of WTG are leviable to service tax and
cannot be taxed as goods:                                                       D
          i) If a contracting parties A and B agree to the purchase of a
          huge boiler for erection, installation and commission in a factory,
          the intention of the contracting parties would envisage the sale
          of a boiler as goods and a rendition of erection, installation and
          commissioning as services. This contract can be either divisible,     E
          indivisible or composite. Whatever may be the nature of the
          contract, the intending parties have contracted for both the
          sale of goods and the rendition of service.
          ii) A patient is under medical treatment at a hospital and the
          doctor had advised for a heart surgery and insertion of a stent.      F
          Here again, it involves two elements. The transfer of the stent
          from the hospital into the body of the patient and the rendition
          of medical services by the doctor through the hospital. Even
          though it involves both goods (stends) and services (medical
          services/hospital services), the contracting parties, namely, the
          patient and the hospital, do not intend to buy and sell a stent       G
          and also a rendition of medical services as 2 items of sale and
          service. The contract is essentially for the rendition of medical
          services and in the course of rendition, based on the advice of
          the doctor, a stent is inserted into the body of the patient.
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332             SUPREME COURT REPORTS                            [2023] 4 S.C.R.


A           3.6 Making above submissions, it is prayed to allow the present
      appeals.
             4. Shri V. Sridharan, learned senior counsel appearing on behalf
      of the respondent has submitted that the precise question involved in the
      present appeal is, “whether service tax can be levied on pure sale (not
B     deemed sale) of customises drawings/designs contained in a medium
      prepared as per the specifications given by the customer.”
            4.1 It is submitted that as per the settled position of law, supply of
      goods as per specifications given by the customer is also treated as sale
      of goods.
C            4.2 It is submitted that the first question is, whether supply of
      goods as per specifications given by the customer is a contract of sale of
      goods or merely a contract for work on labour. It is submitted that in the
      case of Hindustan Shipyard Ltd. v. State of A.P., reported in (2000)
      6 SCC 579, it is held that if the thing to be delivered has any individual
D     existence before the delivery as the sole property of the party who is to
      deliver it, then it is a sale. Further, if the bulk of material used in
      construction belongs to the manufacturer who sells the end product for
      a price, then it is a strong pointer to the conclusion that the contract is in
      substance one for the sale of goods and not one for labour.

E            4.3 Learned senior counsel appearing on behalf of the respondent
      has heavily relied upon the decision of this Court in the case of Associated
      Cement Companies Ltd. v. Commissioner of Customs, reported in
      (2001) 4 SCC 593. It is submitted that in the said decision, this Court
      has held that any media which contain drawings or designs would be
      regarded as goods under the provisions of the Customs Act. It is observed
F     that these items are movable goods and would be covered by Section
      2(22)(e) of the Customs Act. It is observed and held that the fact that
      the technology or ideas is tailormade would not make any difference.
             4.4 It is submitted by Shri V. Sridharan, learned senior counsel
      appearing on behalf of the respondent that it may be true that the decision
G     of this Court in the case of Associated Cement Companies Ltd. (supra)
      may not be an authority for the proposition that service tax cannot be
      levied on pure sale of goods, the said decision is certainly an authority
      for the proposition that designs on a medium will be treated as goods
      under the natural definition of goods. It is submitted that the said decision
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  COMMISSIONER OF CUSTOMS, CENTRAL EXCISE & SERVICE                                  333
     TAX v. M/S SUZLON ENERGY LTD. [M. R. SHAH, J.]

is also an authority for the proposition that the amount paid by the importer        A
to the original supplier is nothing but price for sale of such goods.
        4.5 Shri V. Sridharan, learned senior counsel has also relied upon
the Constitution Bench decision of this Court in the case of Tata
Consultancy Services v. State of A.P., reported in (2005) 1 SCC 308.
It is submitted that in the said decision, the question was, as to whether           B
canned software soled by the appellants can be termed to be “goods”
and as such assessable to sales tax under the Andhra Pradesh General
Sales Tax Act, 1957. It is submitted that in the said decision, this Court
affirmed the decision in the case of Associated Cement Companies
Ltd. (supra) and held that intellectual property, once it is put on to a
media, whether it be in the form of books or canvas (in case of painting)            C
or computer discs or cassettes and marketed would become “goods.”
        4.6 It is further submitted that the intent of service tax legislation
is not to levy service tax on sale of goods. It is submitted that sales tax is
levied on sale of goods whereas the service tax is levied on provision of
service. It is submitted that therefore a transfer of goods for a price              D
cannot be subject to service tax.
       4.7 It is submitted that it is true that different aspects of a transaction
can be taxed through separate provisions. The aspect theory permits
taxation of two different aspects or features of a transaction. For instance,
in a catering contract, supply of food was subject to value added tax and            E
the service aspect was subject to service tax. However, in the case of
BSNL (supra), this Court has observed that the aspect theory does not
allow the value of goods to be included in services and vice versa.
Reliance is placed on the observations made in para 88 of the said
judgment.                                                                            F
       4.8 It is further submitted by Shri V. Sridharan, learned senior
counsel appearing on behalf of the respondent that before the CESTAT,
the respondent raised a specific ground that the services (if any) rendered
by a foreign entity will not fall within the purview of “design services”.
The respondent also raised a specific ground that the extended period of             G
limitation cannot be invoked. However, though the said submissions have
been noted be the CESTAT, the CESTAT has not dealt with those
contentions and therefore it is prayed that the matter may be remanded
to the CESTAT to decide all these questions.

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334             SUPREME COURT REPORTS                           [2023] 4 S.C.R.


A            5. We have heard learned counsel for the respective parties at
      length.
             The issue to be decided in the present appeals is “whether activity
      of import of “Engineering Design & Drawings” from the sister companies
      by the notice during the period under dispute i.e., June, 2007 to September,
B     2010 is classifiable under taxable category “design services” under section
      65(35b) read with Section 65(105)(zzzzd) of the Finance Act, 1994 .
            5.1 While considering the aforesaid issue, the definition of “design
            services” under the Finance Act, 1994, as it stood during the
            impugned period, is required to be considered, which reads as
C           under:
            SECTION 65. Definitions. -In this chapter, unless the context
            otherwise requires,
            ……….

D           (36b) 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:
            ……….
E           (105) (zzzzd) “taxable service” means any service provided or to
            be provided,
            (zzzzd) to any person, by any other person in relation to design
      services, but does not include service provided by-
                (i) an interior decorator referred to in sub- clause (q); and
F
                (ii) a fashion designer in relation to fashion designing referred
                to in sub-clause (zv):
            and the term “service provider” shall be construed accordingly.”
             Thus, it can be seen that the definition of “design services” is a
G     wide and conclusive one, specifically excluding only fashion design and
      interior designing, which were already taxable under separate taxable
      category.
            6. In the present case, the respondent was engaged in manufacture
      of Wind Turbine Generator (WTG). It entered into ‘product development
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 COMMISSIONER OF CUSTOMS, CENTRAL EXCISE & SERVICE                             335
    TAX v. M/S SUZLON ENERGY LTD. [M. R. SHAH, J.]

and purchase agreement’ with three of its sister companies. Relevant           A
clauses of the agreement, more particularly which defined the ‘product’
read as under:
      1.10.1    ‘Design and Development’ of all models of rated capacity
                geared WTG together with all related and pertinent
                components and therein required;                               B
      1.10.2    ‘Design and Development’ of ‘Suzlon Flexislip System’
                together with all related and pertinent components and
                therein required;
      1.10.3    All and any products that is developed by M/s SEG
                conceived (whether or not actually conceived during            C
                regular business hours), discovered, or made by M/s SEG
                and its agents and employees during the course of
                performing its obligations under the Agreement;
      1.10.4    Documentation including material and documents
                containing studies planning activities, manufacturing          D
                process details in respect of above.
      1.10.5    All modifications made to the above, from time to time,
                and all other improvements developed and incorporated
                within the above.
                                                                               E
      1.10.6    Intellectual property and intellectual property rights
                relating thereto in so far it belongs to German Inventions
                Law.
       7. At this stage, it is required to be noted that the said designs
were to be exclusively used by the respondent in the territory of India
                                                                               F
and it was a tailormade design. The respondent engaged the sister concern
M/s SEG for the activity of “Engineering Design & Drawings” used in
manufacturing of WTG, that was reduced as blue print on paper and
delivered to the respondent on the same medium. Such “designs” were
subjected to the service tax even as per the clarification by the Board
dated 18.03.2011 on the issue of applicability of indirect taxes on packaged   G
software. Therefore, as such, the respondent was liable to pay service
tax on the “design services” received from abroad under reverse charge.
It was also found that M/s SEG was a related unit, i.e., subsidiary of the
assessee and the amount received for service by M/s SEG from the
assessee-respondent for the said “Engineering design & drawings”
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336            SUPREME COURT REPORTS                          [2023] 4 S.C.R.


A     services therefore was liable to service tax under reverse charge in
      terms of the concept of ‘associated enterprise’.
             8. Despite the above, M/s SEG raised the invoice/bill on the
      assessee treating it as ‘paper’. However, when the said bill of entry was
      presented treating the same as ‘paper’ for which the duty payable was
B     ‘Nil’. Therefore, neither any custom duty was paid due to exemption
      from payment of duty treating it as ‘paper’ nor the service tax was paid.
      By a detailed judgment and order, the Commissioner held that the
      respondent was liable to pay the service tax under taxable category
      ‘“design services”. However, by the impugned judgment and order, the
      CESTAT has held that the respondent is not liable to pay the service tax
C     under “design services” under the Finance Act, 1994 mainly on the ground
      that the custom authority considered the same as ‘goods’ and therefore
      the same activity cannot be taxed as ‘goods’ and ‘services’. The aforesaid
      view is absolutely erroneous. As observed and held by this Court in the
      case of BSNL (supra), there can be two different taxes/levies under
D     different heads by applying the aspect theory. As per the settled position
      of law now, the same activity can be taxed as ‘goods’ and ‘services’
      provided the contract is indivisible and on the aspect of services there
      may be levy of service tax. The aforesaid aspect has not at all been
      considered by the CESTAT while passing the impugned judgment and
      order. As observed hereinabove, the definition of “design services” is
E     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.
F            9. Even otherwise, 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
G     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. Nothing
      further has been discussed by the CESTAT, more particularly on the
      findings recorded by the Commissioner recorded from para 20 onwards.
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  COMMISSIONER OF CUSTOMS, CENTRAL EXCISE & SERVICE                                     337
     TAX v. M/S SUZLON ENERGY LTD. [M. R. SHAH, J.]

Under the circumstances, the impugned judgment and order passed by                      A
the CESTAT setting aside the levy of service tax is unsustainable and
the same deserves to be quashed and set aside.
       However, at the same time, as other grounds raised before the
CESTAT, namely, “whether the services (if any) rendered by a foreign
entity will or will not fall within the purview of “design services” and                B
invocation of extended period of limitation have not been considered by
the CESTAT and therefore learned counsel for the respondent is justified
in praying to remand the matter to CESTAT to decide the aforesaid two
grounds.
       10. In view of the above and for the reasons stated above, the                   C
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. However, the matter is remitted                   D
back to the CESTAT to consider the grounds raised on behalf of the
respondent, namely, whether the services (if any) rendered by a foreign
entity will not fall within the purview of “design services” and that the
department was not justified in invoking the extended period of limitation.
It is made clear that the matter is remitted back to CESTAT to consider                 E
the aforesaid two grounds and none other. Insofar as the issue of levy of
service tax on the “Engineering Design & Drawings” is concerned, the
same is decided in favour of the revenue and against the assessee.
      11. The instant appeals stand disposed of in terms of the above.
However, in the facts and circumstances of the case, there shall be no                  F
order as to costs.

Divya Pandey                                                     Appeals disposed of.
(Assisted by : Abhishek Pratap Singh and Roopanshi Virang, LCRAs)

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