2018 (7) TMI 864 - AT - Service Tax

Valuation - inclusion of supply of bought out goods - N/N. 12/2003- ST dated 20.06.2003 - Works Contract - The department is of the view that the appellant have artificially bifurcated the value of entire service into sale of goods and service which is not permissible, hence, the total value is gross value of provision of service. Held that - In the facts of the present case, the Revenue has not made any effort to verify that despite making different invoices in respect of services and sale of the goods whether the value of service was suppressed and transferred to the transaction of sale of the goods. Without carrying out any such verification, the department straightaway demanded the service tax on all the bills through which the goods were shown to have sold to the service recipient by the appellant. It is also fact that the appellant have paid the VAT in respect of those invoices where the goods were shown to have sold. In this fact, if the value shown in the sale invoices is correct towards the sale of the goods, the same will not be chargeable to service tax in terms of N/N. 12/2003-ST dated 20.06.2003. The matter needs re-consideration - appeal allowed by way of remand.

Summary

Issues:
1. Bifurcation of contract value into sale of goods and service
2. Demand of duty on supply of bought out goods

Analysis:
1. Bifurcation of contract value into sale of goods and service:
The appellant entered into a contract with L & T, where the total contract value was ?4.40 Crores. However, only ?33 Lakhs was shown as service, and service tax was discharged on this amount. The department alleged that the appellant artificially bifurcated the value into sale of goods and service, leading to the demand being confirmed on the entire amount of ?4.40 Crores. The appellant argued that the bifurcation was done with the consent of the service recipient, L & T, and proper VAT was charged on the goods sold. The appellant claimed exemption under Notification No. 12/2003-ST for the sale value of goods. The tribunal found that the Revenue did not verify if the value of service was suppressed and transferred to the transaction of goods sale. As the Adjudicating Authority failed to verify the correctness of the bifurcation, the matter was remanded for a fresh order.

2. Demand of duty on supply of bought out goods:
In the case of M/s Suzlon Infrastructure Services Ltd, the appellant supplied bought out goods along with services to Suzlon. The department demanded duty on the supply of these goods. The appellant contended that the transaction was solely a sale of bought out goods on which VAT was charged and paid. Citing relevant case laws, the appellant argued that this transaction was not liable for service tax. The tribunal did not provide a separate analysis for this issue in the judgment, and it was not the focal point of the decision.