2018 (12) TMI 378 - AT - Service Tax

Works contract service - evasion of payment of Service Tax - It is also alleged that appellant has wrongly classified the remaining service under ECIS and CICS with the sole intention to wrongly avail the benefit of Notification No.1/2006-ST dated 01.03.2006 - Held that - Prior the appellant started Civil Construction, Errection or Installation at the agreed site, the equipments to be erected/installed at that site were agreed to be supplied to the appellant vide a separate agreement. This particular fact makes it abundantly clear that property in goods which were to be erected and installed by the appellant had not transferred in his favour at the site of construction and erection. Above all it is admitted and acknowledged fact that execution of three separate agreements was the mandate of the bid of company itself. We, therefore, are of the firm opinion that value of this contract cannot be treated as the part of the gross-value for the entire work done by the appellant. Commissioning and Industrial Construction Services - Held that - It is very much apparent that the technical specification, material for the projects were to be provided by the service recipient to the appellant. Relying upon the M/s Larsen & Toubro Ltd. (Supra) as above there is no doubt that the said contract is of work contract service altogether different from remaining two contracts. Department has alleged that the appellant has wrongly availed the benefit of notification 1/2006 but on perusal of show cause notice show that the impugned order‟s period is 01/10/2009. Erection, Commissioning & Installation Services - Held that - For executing this contract the goods required for the purpose were supplied to the appellant vide a separate agreement. No question for this service to become work contract arises nor for adding the value of three of the contracts as to gross-value liability under works contract service as alleged. It is apparent and admitted fact that the appellant is otherwise discharging liability for three of these contracts separately. In the present case though we observe that same judicial indiscipline is committed by the Original Adjudicating Authority herein, however, keeping in view that the same is not the ground of appeal and also that the Commissioner has a bona-fide opinion of the present case being different from the previous one, we do not opt to impose any fine. However the Adjudicating Authority below are warned to strictly maintain the judicial decision. Appeal allowed.

Summary

Issues:
1. Alleged evasion of payment of Service Tax by the appellant for rendering works contract service.
2. Classification of services under different categories and benefit of Notification No.1/2006-ST.
3. Distinction between separate contracts for supply of equipment, civil work, and erection commissioning and installation services.
4. Applicability of abatement rules and entitlement to abatement for different services.
5. Interpretation of indivisible works contract and liability to service tax.
6. Commissioner's failure to properly consider records and distinguish previous decisions.
7. Judicial discipline and adherence to higher appellate forum decisions.

Detailed Analysis:
1. The appeal was directed against the Order of Commissioner, Central Excise, Noida-II, alleging evasion of Service Tax payment by the appellant for works contract service. The department claimed the appellant wrongly classified services to avail benefits under Notification No.1/2006-ST. A show cause notice proposed a demand of &8377;6,79,32,667, which was confirmed by the order under challenge.

2. The appellant argued that separate contracts for supply of equipment, civil work, and erection commissioning services were mandated by the bid of the company. They contended that the value of contracts should not be treated as part of the gross-value for the entire work. Case laws were cited to support their position.

3. The Tribunal observed that the contracts were distinct activities and not an indivisible works contract. The property in goods did not transfer to the appellant at the site of construction, supporting the appellant's position. The order was set aside based on the principles of composite contracts and the constitutional basis for divisibility.

4. Regarding the contract for Commissioning and Industrial Construction Services, it was noted that the technical specifications and materials were provided by the service recipient. The appellant had not availed the benefit of Notification 1/2006 but had utilized Rule 2 (A) (ii) for abatement, which the Commissioner failed to consider properly.

5. For the Erection, Commissioning & Installation Services contract, the goods required were supplied separately to the appellant. The Tribunal held that the services were distinct and not part of a works contract, setting aside the order to include their value in the gross-value liability.

6. The Commissioner's attempt to distinguish the present case from previous decisions was deemed incorrect. The Tribunal emphasized the importance of maintaining judicial discipline and adherence to higher appellate forum decisions.

7. Despite not imposing a fine, the Adjudicating Authority was warned to strictly maintain judicial decisions. The impugned order was set aside, and the appeal was allowed based on the detailed analysis and findings presented.