2021 (11) TMI 659 - AT - Service Tax

Works Contract Composition scheme - demand of differential Service Tax - suppression of value of services, by not including value of Transformers and other equipment - price variation clause - extended period of limitation - HELD THAT - The impugned order is erroneous and mis-conceived as service tax has been demanded on the apparent gross value, as per contract/ agreement, of ₹ 25,71,96,000/-. The same is also in contrast to the findings of the ld. Commissioner. All the three contracts are independent contracts , there being no artificial bifurcation and supply of goods and supply of services. Ld. Commissioner has also observed in the impugned order that in relation to the works contract service, the value of transformers cannot be included. The appellant is not liable to pay service tax on the transportation charges paid by them, as they are neither a GTA and have admittedly arranged transportation for the service receiver viz. PGCIL, as a pure agent. No service tax is payable towards projected training as per contract, as admittedly the appellant has not provided any training nor they have raised any invoice towards the training charges. So far the service tax on installation/erection charges( including civil work) is concerned, it is held that the turnover of ₹ 15,79,05,395/- has to be adjusted for the amount of VAT and service tax included in the gross value, and after deduction of these, the appellant shall be further entitled to deduction for the material component as per Service Tax (Determination of Value) Rules 2006. The impugned order is set aside and matter remanded for the limited purpose of calculation of service tax payable on the gross value towards erection/installation charges of ₹ 15,25,05,395/-. The appellant is directed to prepare the calculation of admitted tax and appear before the Original Adjudicating Authority for verification and/or adjustment, if any. This appeal is allowed in part and part by way of remand.

Summary

Issues Involved:
1. Applicability of Works Contract Composition Scheme.
2. Inclusion of value of Transformers and other equipment in the total value of services.
3. Alleged suppression of value of services and invocation of the extended period of limitation.
4. Calculation of Service Tax based on projected vs. actual turnover.
5. Service Tax liability on various services including transportation, training, erection, and works contract.

Issue-wise Detailed Analysis:

1. Applicability of Works Contract Composition Scheme:
The Principal Commissioner initially alleged that the Appellants were deemed to have opted for the Works Contract Composition Scheme. However, upon review, it was determined that the Appellants had not opted for this scheme, and it could not be assumed that they had. The judgment clarified that the Appellants were correct in not being considered under the Works Contract Composition Scheme.

2. Inclusion of Value of Transformers and Other Equipment:
The Principal Commissioner initially included the value of Transformers and other equipment sold by the Appellants and imported by PGCIL from Ganz, Hungary, in the total value of services. However, it was later held that the value of Transformers to be installed cannot be included in the value of works contract services. Only the value of materials used in erection and installation services should be included. The judgment upheld that the contracts for supply of goods and services were independent and not artificially bifurcated.

3. Alleged Suppression of Value of Services and Invocation of Extended Period of Limitation:
The Principal Commissioner invoked the extended period of limitation, alleging suppression of the value of services by not including the value of Transformers and other equipment. However, the judgment found that the Appellants had maintained proper records and filed returns periodically. The show cause notice was based on presumptions and assumptions, and it was issued more than three years after the relevant period, making the invocation of the extended period of limitation unjustified.

4. Calculation of Service Tax Based on Projected vs. Actual Turnover:
The Principal Commissioner calculated Service Tax based on the projected gross turnover of ?25,71,96,000 as per the contract, instead of the actual value of services provided, which was ?23,18,61,363. The judgment clarified that Service Tax should be payable only on the actual value of services provided, which was ?15,79,05,395 for erection and installation charges, inclusive of VAT and Service Tax. The Appellants had already paid excess Service Tax of ?3,72,076 on the assessable value of ?13,92,54,625.

5. Service Tax Liability on Various Services:
- Transportation Services: The Appellants arranged transportation as a pure agent for PGCIL and were not a Goods Transport Agency (GTA). Hence, no Service Tax was payable on transportation services, which were covered by the negative list under Section 66D (p).
- Training Services: No training services were provided, and no invoices were raised; hence, no Service Tax was payable.
- Erection and Installation Services: The judgment held that the turnover for these services should be adjusted for VAT and Service Tax included in the gross value, and deductions should be made for the material component as per Service Tax (Determination of Value) Rules 2006.

Conclusion:
The appeal was allowed in part and remanded for recalculating the Service Tax payable on the gross value towards erection/installation charges. The Appellants were directed to prepare the calculation of admitted tax and present it for verification. They were also entitled to a refund of any excess Service Tax paid, as it was considered a revenue deposit, and no limitation period applied. The judgment emphasized the importance of basing Service Tax calculations on actual services provided rather than projected contract values.