2016 (12) TMI 667 - AT - Service Tax

Works contract - whether the composite contract for entire work design, supply, testing, erection and commissioning of auto LPG dispending System on turnkey basis is open to vivisection or artificial splitting? - Held that - It is seen that the period involved in this case is from November, 2005 to March 2006. As rightly pointed out by Ld. Counsel for appellants, the issue is no longer res integra. In the appellant s own case M/s Vanaz engineers Ltd. Vs. CCE, Pune-III, 2016 (3) TMI 166 - CESTAT MUMBAI for an identical turnkey composite contract, this Tribunal took the view that for the period prior to 01.06.2007, work contract is non-taxable. This was based on the judgment of Hon ble Apex court in the case of CCE, Kerala Vs. Larsen & Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT . In the said judgement, Hon ble Apex Court has settled the law that prior to 01.06.2007, the Service Tax liability will not arise when work contract is executed, under any other services - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
Whether the composite contract for the entire work design, supply, testing, erection, and commissioning of auto LPG dispensing System on a turnkey basis is open to vivisection or artificial splitting.

Analysis:
The appeal was directed against Order-in-Appeal No. PIII/RS/163/2012 passed by the Commissioner of Central Excise (Appeals), Pune-III. The appellants, engaged in providing integrated LPG solution business, were noticed to be executing a turnkey project and providing services such as consulting engineer, management services, erection, and commissioning services. They raised separate bills for the supply of raw materials and erection/commissioning charges, paying Service Tax only on the latter. The Revenue contended that the appellants were providing multiple services, including consulting engineers, management services, and erection/commissioning services, and should pay Service Tax on the total contract value. The show cause notice was adjudicated in favor of the Revenue, leading to the appeal.

During the proceedings, the appellants highlighted that the project was a turnkey one for a specific period and referred to a previous Tribunal judgment in their favor for a similar case. The Revenue argued that the contract was a single composite one, and separating it for Service Tax purposes was impermissible. The Tribunal examined the issue in detail, considering the period in question and the relevant legal precedents.

The Tribunal noted that the issue was no longer res integra as it had been decided in favor of the appellants in a previous case involving a similar turnkey composite contract. Citing the judgment of the Hon’ble Apex Court in a related matter, the Tribunal concluded that for the period before a specific date, the Service Tax liability did not arise for work contracts involving other services. Consequently, the Tribunal found in favor of the appellant, holding that the impugned order was unsustainable. The order was set aside, and the appeal was allowed.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing that for the period in question, the composite contract for the auto LPG dispensing System on a turnkey basis could not be artificially split for Service Tax purposes. The decision was based on legal precedents and settled law regarding the taxation of work contracts involving multiple services prior to a specific date.