2014 (7) TMI 240 - AT - Service Tax

Works contract service - valuation - divisible or indivisible contract - Service of Erection, Commissioning and Installation - Held that - contract is not an indivisible works contract , as the same mentions the details of the price of the supply items and various services. The invoices have been issued by the appellant based on rate schedule in the contracts/works order and the invoices also mention separate price of the supply items and various services and as such from the invoices it is possible to determine the value of the Erection/installation and Commissioning service. The appellant s contention is that all the contracts are of this type only. From the contracts/work order and the respective invoices, it is possible to determine the value of taxable services, assessment of service tax should have been done on this basis, instead of treating the gross amount received minus value of the goods supply items (taken as ₹ 24.25 lakhs) as gross amount received for the services of Erection/installation and Commissioning services and calculating service taxes on this basis after giving 67% abatement - Matter remanded back for de-novo adjudication - Decided in favour of assessee.

Summary

Issues:
Service tax liability on Erection, Commissioning, and Installation services provided by the appellant to the Governments of M.P. and Chhattisgarh from 01.04.04 to 31.03.09.

Analysis:

Issue 1: Classification of Services
The appellant contended that their services should be classified as 'works contract service' from 01.06.2007, which would not be taxable. They argued that the services provided were related to dams and canals, not subject to service tax. The Commissioner, however, did not accept this argument and confirmed a service tax demand of &8377; 71,12,792 along with penalties. The appellant disputed this classification, stating that the service tax involved was only about &8377; 1.5 Lakh on a total amount of approximately &8377; 25 Lakh received for Erection, Commissioning, and Installation services. The Tribunal noted that the contracts were not indivisible works contracts but split contracts with separate values for supply items and services. The invoices provided by the appellant detailed the prices of supply items and services separately, allowing for the determination of the value of taxable services. The Tribunal concluded that the Department's approach of calculating service tax based on the gross amount received minus the value of supply items was incorrect. The impugned order was set aside, and the matter was remanded for de-novo adjudication by the Original Adjudicating Authority.

Issue 2: Hearing and Final Disposal
Although the matter was initially listed for a stay application hearing, the Tribunal, after hearing both sides, decided to proceed with final disposal with the consent of the parties. The appellant's counsel presented arguments based on sample work orders, asserting that the services provided were not entirely taxable under Erection, Commissioning, and Installation services. The Department defended the impugned order, reiterating the Commissioner's findings. After considering submissions and reviewing the records, the Tribunal found in favor of the appellant, emphasizing the need for a proper assessment of the taxable services based on the contract details and invoices provided. The appeal and stay application were disposed of accordingly, with the impugned order being set aside for reevaluation by the Adjudicating Authority.

This detailed analysis of the legal judgment highlights the key arguments presented by the appellant, the Department's defense, and the Tribunal's decision regarding the classification and taxation of services provided by the appellant.