2007 (8) TMI 297 - AT - Service Tax

Contract for design, engineering, construction, erection, installation, procurement, supply and transportation, etc. - held that the contract was a composite contract in the nature of execution of the work contract on turnkey basis based on lump sum value/price in view of Tribunal s decision in the case of M/s Daelim Industries Co., held that such works contracts can not be vivisected and a part of the services cannot be said as consulting engineer services

Summary

Issues:
Interpretation of a composite contract for service tax liability

Analysis:
The case involved a dispute regarding the classification of a contract for service tax purposes. The respondents were awarded a contract for various services related to the construction of a liquid chemical handling jetty. The Revenue sought to levy service tax on a part of the services provided by treating it as 'consulting engineer' services. However, the Commissioner (Appeals) determined that the contract was a composite one for the execution of work on a turnkey basis, based on a lump sum value. The Commissioner held that the lump sum price in the contract covered all items specified in the scope of work, technical specifications, and other contract documents. Relying on a previous Tribunal decision, it was concluded that such works contracts cannot be dissected, and a portion of the services could not be classified as 'consulting engineer' services. Consequently, the demand for service tax was set aside, leading to the Revenue's appeal.

Upon review, the Appellate Tribunal considered the arguments presented by the Revenue, including reliance on a Board's circular and the contention that the previous Tribunal decision was legally flawed as the service provider should identify the taxable portion of services. However, the Tribunal noted that the earlier decision had been upheld by the Hon'ble Supreme Court when the Commissioner's special leave petition was rejected. Therefore, the Tribunal found no grounds to support the Revenue's position and rejected the appeal accordingly.

In conclusion, the Appellate Tribunal upheld the Commissioner (Appeals) decision, emphasizing that the contract in question was a composite one for turnkey execution of work, and the service tax liability could not be apportioned for specific services within the contract. The Tribunal's decision was based on legal precedents and established principles regarding the taxation of works contracts, ensuring consistency and clarity in the application of service tax laws.