9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (12) TMI 1071 - HC - Service TaxNature of transaction - bifurcation of works contract - While the petitioner s say is that the transactions are separate and not composite in nature, it is the contention of the respondents that the transactions are composite in nature and that they have been artificially split - Held that - Whether or not, the impugned transactions are composite in nature, as alleged by the respondents is a mixed question of fact and law. The impugned order refers to a judgment, State of Andhra Pradesh V. M/s.Kone Elevators (India) Limited, 2005 2005 (2) TMI 519 - SUPREME COURT OF INDIA , (in short Kone-I), and the principles articulated therein, which has been overruled by a Larger Bench of the Supreme Court inKone Elevator India Pvt. Ltd., V. State of Tamil Nadu 2014 (5) TMI 265 - SUPREME COURT (in short Kone-II) - As to what extent the Adjudicating Authority/respondent No.1 was influenced by the ratio of the judgement in Kone-I cannot be known. The judgement in Kone-I has had a bearing on the manner in which subject contracts have been viewed - the writ petition is thus disposed off - matter remanded back.
Issues Involved:
1. Whether the impugned order was influenced by an overruled Supreme Court decision. 2. Whether the contracts were comprehensive works contracts or artificially split transactions. 3. The validity of the service tax demand and associated penalties. Detailed Analysis: Issue 1: Influence of Overruled Supreme Court Decision The petitioner challenged the impugned order dated 31.08.2016 on the ground that the Adjudicating Authority relied on the Supreme Court's decision in State of Andhra Pradesh V. M/s. Kone Elevators (India) Limited (Kone-I), which had been overruled by a larger bench in Kone Elevator India Pvt. Ltd. V. State of Tamil Nadu (Kone-II). The court noted that the impugned order indeed referenced Kone-I, which was no longer relevant. The extent to which this overruled judgment influenced the Adjudicating Authority's decision could not be ascertained, but it had a bearing on the view of the contracts. Issue 2: Nature of Contracts The petitioner argued that their transactions involved separate contracts for the supply of goods and services, not comprehensive works contracts. The petitioner demonstrated that the sale price and margin were transparent and reflected in commercial invoices, with relevant CST returns filed. They contended that the goods supplied were either pure sales, exports, or part of contracts that clearly delineated the value of goods and services. The Adjudicating Authority, however, concluded that the contracts were comprehensive works contracts for design, engineering, supply, erection, commissioning, and installation on a Lump Sum Turn Key basis. It was determined that these contracts were artificially split to reduce the value of taxable services. Issue 3: Validity of Service Tax Demand and Penalties The respondents issued a show-cause notice demanding service tax of ?155,93,77,607/- along with interest and penalties. The petitioner argued that certain amounts represented pure sales, exports, or supply portions in contracts not liable for service tax. However, the Adjudicating Authority found that the value of goods was inflated to reduce the taxable service value, confirming the demand of ?155,10,33,144/- in service tax, interest, and penalties under Sections 77(2) and 78 of the Finance Act, 1994. The petitioner was given a concession to reduce the penalty to 25% if the service tax and interest were paid within 30 days. Conclusion: The court set aside the impugned order due to the reliance on the overruled Kone-I judgment and directed the petitioner to appear before the Adjudicating Authority on 19.12.2016 for a fresh hearing. The Adjudicating Authority was instructed to pass a new order after affording due opportunity to the petitioner, ensuring that the setting aside of the impugned order was not reflective of the merits of the case. The writ petition was disposed of without costs, and the connected miscellaneous petition was closed.
|
