2018 (3) TMI 554 - AT - Service Tax

Erection and commissioning services - Revenue entertained a view that erection commissioning of work undertaken by the respondent is liable to be taxed as a service contract and accordingly proceedings were initiated against the respondents - Held that - What is important is to see whether the respondent is acting in the ambit of overall composite works contract. In the present case, we are in agreement with the findings of the impugned order that these are composite works contract and cannot be taxed as simple service contracts under a particular heading like erection commissioning service - appeal dismissed - decided against Revenue.

Summary

Issues involved:
Interpretation of composite works contract for taxation as service contract.

Analysis:
The case involved a dispute regarding the taxation of erection commissioning work undertaken by the respondents as a service contract. The Revenue contended that the work should be taxed as a service contract, while the respondents argued that they were executing composite works contracts not liable for taxation before 1.6.2007. The Commissioner (Appeals) had dropped the demand for service tax, leading to the Revenue's appeal.

The Revenue argued that the respondents issued clearly identifiable invoices for services provided, emphasizing that the service portion of the contract was distinct and should be taxed separately. They highlighted that the invoices raised by the appellant clearly identified the services rendered.

In response, the counsel for the respondent presented sample copies of contracts and contended that the method of invoicing for a composite work contract did not determine the tax liability. They referenced a judgment of the Hon’ble Supreme Court in Commissioner Vs. Larsen & Toubro Ltd. to support their position.

Upon hearing both sides and examining the appeal records and sample contracts, the Tribunal noted that the contracts involved design, supply, erection, testing, commissioning, and maintenance work. They observed that the contracts included the supply of the respondent's own goods, procured goods, and labor for completing the work, constituting a typical works contract service. The Tribunal agreed with the impugned order that the contracts were composite works contracts and could not be taxed as simple service contracts under a specific heading like erection commissioning service.

Consequently, the Tribunal found no merit in the Revenue's appeal and dismissed it. The cross-objection filed by the respondent was disposed of accordingly. The judgment was dictated and pronounced in open court by the Tribunal.