2019 (1) TMI 182 - AT - Service Tax

Rectification of Mistake - appellant has submitted that this Hon ble Tribunal while passing Final Order dated 13.02.2018, has failed to consider various vital points which were duly argued by the counsel for the appellant during the course of hearing - Held that - The appellant could not have again transferred the material, supplied under the supply contract, by way of works contract or service contract. Thus, we find that there is error in the Final Order passed by this Tribunal, whereby it has been considered that supply & transfer to the principal is by way of accretion under the erection contract. We find that the facts are otherwise, therefore the findings in the Final Order are perverse. We recall the Final Order dated 13.02.2018 - further, it is also held that the appellant is not liable to Service Tax on the goods supplied under the separate supply contract, as the ownership was already with the principal at the time of execution of erection contract. Appeal allowed - decided in favor of appellant.

Issues: Rectification of Mistake in Final Order, Separate Contracts for Supply of Goods and Services, Clubbing of Amount Received under Separate Contracts, Service Tax Liability, Interpretation of Notification No. 23/2009-ST.

Rectification of Mistake in Final Order: The appellant filed for rectification of mistake in the Final Order passed by the Tribunal, stating that vital points were not considered during the hearing. The appellant argued that the Tribunal's findings were erroneous and contrary to the facts on record, especially regarding the separate contracts for supply of goods and services in the Barmer and Sitarganj projects.

Separate Contracts for Supply of Goods and Services: The Tribunal observed that there were distinct contracts for the supply of goods and erection work in both the Barmer and Sitarganj projects. It was noted that there was no interlinking between the two contracts, even though they were between the same parties. The Tribunal analyzed the ownership of materials under the supply contract and the execution of the erection work, concluding that there was no transfer of materials under the erection contract.

Clubbing of Amount Received under Separate Contracts: The appellant argued against the Tribunal's decision to club the amounts received under the separate contracts for the purpose of Service Tax liability under the 'Works Contract Composition Scheme.' The Tribunal found that the appellant had correctly deposited Service Tax under the composition scheme for the erection contract, which involved materials like cement and steel. The Tribunal held that the charging of Service Tax by clubbing amounts from separate contracts was erroneous and against the provisions of the law.

Service Tax Liability: The Tribunal referred to a Larger Bench ruling regarding the applicability of service tax on turnkey projects, emphasizing that service tax is not attracted in certain cases. The Tribunal concluded that the appellant was not liable to pay Service Tax on the goods supplied under the separate supply contract, as the ownership of the goods was already with the principal at the time of executing the erection contract.

Interpretation of Notification No. 23/2009-ST: The Tribunal analyzed Notification No. 23/2009-ST, which specified the calculation of the gross amount under a 'works contract.' The Tribunal noted that the notification applied prospectively and did not apply to contracts where work had commenced or payment was received before the specified date. As the work in question had started before the notification date, the clubbing provision did not apply.

In conclusion, the Tribunal allowed the appellant's applications, set aside the impugned orders, and directed the appellant to pay Service Tax only on the erection contract under the normal scheme, not under the composition scheme. The appellant was instructed to file a fresh computation of tax payable within a specified period for verification and compliance.

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