2023 (4) TMI 348 - AT - Service Tax

Valuation of goods - Erection, Commissioning and Installation Service - whether the value of materials supplied by the Appellant under a contract is required to be included in the taxable value of Service or otherwise? - suppression of facts or not - extended period of limitation - HELD THAT - There is no dispute that there is also contract for supply of goods/Sale of goods and contract for services namely erection, installation and commissioning. Appellant have not paid service tax on supply portion on which they have paid VAT/CST. On going through the contracts and documentary evidences in the form of invoices, Balance sheet and Profit and Loss account, VAT return and detailed work sheet showing bifurcation of supply of goods and service portion separately submitted by the Appellant before us, we find that the contracts entered into by the appellants with their customers also gave the break-up of value of service portion and supply of material/goods portion. The Appellant as per the contract raise the bills and also account for the transaction in their books of account. On service portion they have paid the Service tax and on material supply portion paid the VAT/CST as applicable - Admittedly, the value of the goods and materials, which are required to be used forproviding service stand separately disclosed in the agreement/contract as also separately mentioned in the invoices raised by the appellants and their books of account. Appellants have paid the VAT on the supply of goods, in such case it has to be held that the same were sold to the customers and the service tax cannot be demanded from the appellant on the value of the said goods. Suppression of facts or not - extended period of limitation - HELD THAT - There is no suppression of facts or any mala fide intention to evade payment of service tax on the part of appellant. Further, the ground of bona fide belief can be invoked in the present case as the main contractor who entered into agreement with the ultimate client were charging such client along with service tax as claimed by the appellant. There is a reason for a bona fide belief in such arrangement regarding non-liability of sub-contractor when the main contractor is liable to discharge full service tax. Though the said principle is not applicable against the tax liability but the question of invoking extended period is to be answered in favour of the appellant. Accordingly, there is no case of suppression of fact, fraud, misstatement etc. in the non-payment of tax on this disputed activity by the appellant and, we hold that extended period of limitation is not attracted. Appeal allowed - decided in favour of appellant.

Summary

Issues Involved:

1. Whether the amount received by the appellant from their main contractors towards providing "erection, commissioning and installation services" would be considered taxable income and whether the service tax involved would be payable by the appellant.
2. Whether the amount received by the appellant from their clients towards the value of goods traded during the provision of "erection, commissioning and installation service" would be considered taxable income by disallowing them the benefits of Notification No. 12/2003-ST and whether service tax involved would be payable by the appellant.
3. Whether the amount received by the appellant from their clients towards the value of goods traded during the provision of "erection, commissioning and installation service" in the subsequent financial year would be considered taxable income by disallowing them the benefits of Notification No. 12/2003-ST and whether service tax involved would be payable by the appellant.

Judgment Summary:

Issue 1:
The Tribunal examined whether the amount of Rs. 1,26,22,597/- received by the appellant from their main contractors for providing "erection, commissioning and installation services" to GAIL and GSPL during FY 2007-08 would be taxable. The appellant argued that they had paid VAT on the material supply portion and service tax on the service portion. The Tribunal found that the contracts provided a clear break-up of the value of service and material portions, and the appellant had paid VAT on the material supply portion. The Tribunal held that the value of goods sold should not be included in the taxable value of services, as per Notification No. 12/2003-ST. The Tribunal set aside the demand for service tax on this amount.

Issue 2:
Regarding the amount of Rs. 20,55,26,239/- received by the appellant from their clients for the value of goods traded during the provision of "erection, commissioning and installation service" from FY 2007-08 to 2010-11, the Tribunal noted that the appellant had paid VAT on the material supply portion. The Tribunal found that the benefit of Notification No. 12/2003-ST, which exempts the value of goods and materials sold by the service provider from the service tax, should be extended to the appellant. The Tribunal held that the service tax demand on this amount was not justified and set it aside.

Issue 3:
For the amount of Rs. 15,21,16,142/- received by the appellant from their clients towards the value of goods traded during the provision of "erection, commissioning and installation service" in FY 2011-12, the Tribunal reiterated that the benefit of Notification No. 12/2003-ST should be extended to the appellant. The Tribunal found that the appellant had paid VAT on the material supply portion and that the value of goods sold should not be included in the taxable value of services. The Tribunal set aside the service tax demand on this amount.

Conclusion:
The Tribunal allowed the appeals, setting aside the impugned order and granting consequential relief to the appellant. The Tribunal emphasized that the value of goods and materials sold by the appellant should not be included in the taxable value of services, provided that VAT had been paid on the material supply portion. The Tribunal also noted that there was no suppression of facts or mala fide intention on the part of the appellant, and thus the extended period of limitation was not applicable.