2012 (2) TMI 298 - AT - Service Tax

Turnkey Projects - Composite Contracts - Consulting Engineering Services - first appellate authority held turnkey contract can be vivisected - allowed the appeal on merit but also on limitation Held that - earlier & present show cause notices demonstrates that activities of the appellant was well within the knowledge of the Department. When Revenue intended the respondents to be taxed under the category of Consulting Engineer Service , they should have issued notice forthwith. Therefore, the first Appellate order granting relief to respondent on time bar does not appear to be erroneous Appeal dismissed.

Summary

Issues:
1. Interpretation of contract for taxation under different clauses of taxable entries.
2. Vivisection of the contract.
3. Time limitation for tax proceedings.

Analysis:
1. The appeal centered around the interpretation of the contract, with the Revenue contending that the entire contract, being turnkey, should be taxed under various clauses of taxable entries. However, the Assessee argued that vivisection of the contract was permissible, citing a Larger Bench decision. The first Appellate authority sided with the Assessee, allowing the appeal based on this interpretation.

2. The respondents further argued that the first Appellate authority's decision was correct not only on merit but also on the grounds of limitation. They pointed out specific paragraphs in the order and notes of the argument to support their contention that the proceedings were time-barred. The activities carried out by the Appellant fell between two distinct periods subject to show cause notices, and it was emphasized that the Department was aware of the Appellant's activities due to its scrutiny of BHEL, a significant sector.

3. The Tribunal compared the previous show cause notices with the present one and concluded that the Department had sufficient knowledge of the activities in question. It was noted that if the Revenue intended to tax the respondents under a specific category, they should have issued a notice promptly. Consequently, the first Appellate order granting relief to the respondent on the grounds of time limitation was upheld, leading to the dismissal of the Revenue's appeal.