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2018 (6) TMI 673 - AT - Service TaxErection, commissioning and installation service - Composite Contracts - Whether the activity undertaken by the appellant can be treated as composite and indivisible contract so as to be covered by the Hon ble Supreme Court s decision in the case of CCE, Kerala vs. Larsen and Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT ? - Held that - On a perusal of contract dated 20.7.2005 given by Karnataka Power Transmission Ltd. to the appellants, it is found that, the contract in respect of rearrangement of Hubli Bagalkot 110KV DC Line to link proposed 220KV receiving station Bagalkot is mentioned to be on turnkey basis. Similarly contract in respect of construction of 66KV DC Line from H.N. Pura to SRS Hootagally is mentioned to be on turnkey basis but it has a portion containing supply of materials also - the contracts are though composite are not indivisible - the ratio of the Hon ble Supreme Court in respect of Larsen and Toubro Ltd. is not squarely applicable in the instant case, as pleaded by the appellants. Applicability of exemption Notification No.45/2010-ST dated 20.7.2010 - Held that - This exemption appears to be for all taxable services relating to transmission of electricity. Whether the activities performed by the appellant are in relation to the transmission of power? - Held that - erection commissioning and installation comes within the ambit of the expression in relation to - the activity undertaken by the appellants are to be held to fall in the ambit of in relation to transmission of electricity in terms of Notification No.45/2010 dated 20.7.2010 as there is a clear nexus between the service rendered by the appellant and transmission and distribution of electricity - the exemption contained in the said Notification is squarely applicable to the appellants. Whether the appellants have correctly availed the Notification? - Held that - The liability of duty itself is not surviving in view of the exemption Notification No.45/2010 dated 20.7.2010, these issues do not require any consideration at this juncture. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Whether the activity undertaken by the appellant can be treated as a composite and indivisible contract. 2. Whether there is a nexus between services rendered by the appellant and the transmission and distribution of electricity to qualify for exemption under Notification No. 45/2010 ST. 3. Whether the credit and the Notifications availed by the appellants are correct in law. Detailed Analysis: Issue 1: Composite and Indivisible Contract The appellant argued that their contracts were composite and indivisible, thus not liable for service tax prior to 01.06.2007, as per the Supreme Court's decision in CCE, Kerala v. Larsen & Toubro Ltd. The contracts involved the supply of materials and erection, commissioning, and installation services, which were treated as a single composite contract. The appellant cited various judgments supporting that composite contracts were not subject to service tax before 01.06.2007. The department, however, contended that the contracts were divisible, with clear bifurcation of values for supply and services, making them liable for service tax. The tribunal found that while the contracts were composite, they were not indivisible, thus the Supreme Court's decision in Larsen & Toubro Ltd. was not entirely applicable. Issue 2: Nexus with Transmission and Distribution of Electricity The appellant claimed exemption under Notification No. 45/2010 ST, arguing that their activities related to the transmission and distribution of electricity. The department argued that the appellant's activities were for creating infrastructure and not directly related to transmission and distribution. The tribunal, referencing multiple judgments, concluded that erection, commissioning, and installation services fall within the ambit of activities related to the transmission of electricity. Therefore, the exemption under Notification No. 45/2010 ST was applicable to the appellant's activities. Issue 3: Correctness of Credit and Notifications The appellant argued that they were entitled to Cenvat credit under Notification No. 19/2003, which did not bar the availment of input service credit. The department contended that the credit was wrongly availed as the appellant opted for Notification No. 1/2006, which barred such credit. The tribunal noted that since the appellant was eligible for exemption under Notification No. 45/2010 ST, the issue of credit and notifications became irrelevant. Conclusion: The tribunal allowed the appeal, holding that the appellant's activities were exempt under Notification No. 45/2010 ST, thus no service tax was payable. The tribunal did not consider the issues of credit and notifications further due to the exemption applicability. The order was pronounced in open court on 13.06.2018.
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