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TMI Blog2006 (3) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... ." The Lump sum Price offered by the said assessee against the work of Turn Key Project for the said units of Digboi Refinery are as follows: Sr. No. Description Price Contract No. PROJ/ SDU/DR/53 of PROJ/HDT/DR/54 of 1. Lump sum price for Residual Process Design and detailed Engineering Rs. 9,00,90,000/- Rs. 8,31,60,000/- 2. Lump sum price for Supply portion Rs. 51,54,16,100. /- Rs. 54,64,00,000/- 3. . Lump sum price for Construction installation portion Rs. 38,36,24,000/ Rs. 35,21,04,000/- The above lump sum prices offered by the said appellant have been accepted by M/s. Indian Oil Corporation Ltd. (Assam Oil Division), Digboi vide their letter Ref. No. SDU/CON/02 and HDT/CON/03 respectively dated 24.2.2000. 3. In the second case, the respondent M/s. Petrofac International Ltd., New Delhi was awarded the contract for Residual Process Design, Detailed Engineering, Procurement, Supply, Construction, Fabrication, Erection, Installation, Testing, Commissioning and Mechanical Guarantee of sulphur block at Gujrat Refinery of M/s. Indian Oil Corporation Ltd., Vadodara by accepting bid document 3841/3851/T-48/97-98/SKD/02. 4. They were awarded the said con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... separately and clearly mentioned it would cease to be an individual work contract and there shall be absolutely no dispute about the liability to service tax of the taxable services provided in course of execution of the work contract. In view of this the order of Commissioner (Appeals) was contrary to the facts of the case. 9. The learned SDR invited attention to the details of the contract wherein the break up, the lump sum price for residual process design and detailed engineering was given separately as compared to lump sum price for supply portion and lump sum price for construction/installation portion. It was submitted that it was only in respect of the lump sum price for residual process design and detailed engineering that contract itself indicates that the service tax is included in the lump sum price as distinct from the Daelim Industrial Co. Ltd. case where the service tax was indicated as per the prevailing rate and the amount was quantified and therefore there was an element of uncertainty in respect of service tax and it is not known whether the service tax was actually paid or not. This was not the case in the contracts relating to M/s. Larsen & Toubro where servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e irrelevant after 46th amendment of the constitution by which article 336 (29A) of the constitution of India was amended so as to enlarge the scope of entry 54 of List II of 7th Schedule of the Constitution "tax on sale or purchase of goods, to include tax on transfer of property in goods (whether as goods or in some other form) involved in execution of a work contract". Therefore, the argument that the work contract cannot be vivisected and a part of it subject to tax is no longer valid. Moreover, Supreme Court in its judgment in the case of W/s. Associated Hotels relied upon by the Tribunal in its judgment in case of W/s. Daelim Industrial Co. Ltd. has upheld that an implied contract for supply of goods while executing a service contract can be inferred if there is evidence in this regard. 12. Reference was also invited to the decision of the Kerala High Court in the case of Kerala Colourlabs Association Vs. Union of India -2003 (TIOL) 19 H. C. Kerala, wherein it was held that for levy of service tax, the taxing event is rendering of service. It was pleaded before the court that in photography more than 50% of the cost is the cost of photo paper and other materials, which is pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... project for construction of flats, administrative building involve etc. involve a lot of preparatory work is required e.g. soil testing, survey, planning design, drawing etc. and once the design and drawing are completed by the construction company it always seeks the approval of the client before proceeding with the construction. If the client suggests some changes they incorporated in the design. This portion of the work is provided to its client and the service is definitely of a 'consultancy engineer' and hence taxable it was accordingly submitted that the instant case is fully covered by the Board's circular and therefore the drawing and detailed engineering charges will be subject to service tax. M/s. Petrofac International Ltd. 15. In respect of above case, the learned SDR submitted that the issue involved is the same and the facts are also similar and the arguments in the above case will fully apply to the instant case also. 16. In view of above, it was submitted that once the work contract relates to supply of services as well as to execution of work i.e. construction, service tax shall be payable on the lump sum paid for the services rendered and is liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g also include the lump sum price for supply portion and for construction and installation portion. A great emphasis has been laid on the fact that there was a separate demarcation of price for residual process design and detailed engineering including the fact that the price included the service tax payable. It was submitted that the price break up was only for the purpose of billing schedule or control of cash flow. There was no agreement between the parties for rendering the service of design and engineering for specific price as a stand alone activity. In case of respondent, there was no understanding for separate services for design and engineering divorced from the main contract. Therefore amount of total lump sum price can be attributable as taxable service of a consulting engineer. The detailed engineering was carried out by Engineers India Ltd. as consulting engineer for I.O.C.L and to a limited intent by another company by the respondents group of companies viz. L & T Chiyoda Ltd., Baroda and they had shown the services as consulting engineer in the service tax return filed by them and the service tax as applicable paid accordingly The amount of service tax indicated in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Service of food is not an aim for the passenger in itself but for better enjoyment of the main service of air transport. Whether it is necessary for the main supply is not a relevant question] (iii) Card Protection Plan Ltd. Vs. Customs and Excise Commissioners [1999] STC 270 ECJ and Card Protection Plan Ltd. Vs. Customs and Excise Commissioners [2001] STC 174 HL [There was a single supply where one or more elements constituted the principal service and others were merely ancillary, in that they did not constitute for customers aims in themselves, but simply a means of better enjoying the principal service. What constitutes a single supply in economic sense should not be artificially split.] (iv) Customs and Excise Commissioners Vs. British Telecommunications Plc [1999] STC 758 [Delivery charges shown separately in the invoice does not imply that BY was getting a supply of service of delivery apart from supply (sale) of cars There was a single supply of purchase of a delivered car Delivery was incidental to supply of the car The fact that delivery could have been separately arranged from difference party is not material The court has to see what the arrangement was in the instan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction contracts cannot be subjected to service tax as consulting engineer service, either a whole or in part and further observed that this position remains covered by the decision in the case of Daelim case (supra). 23. As regards 46th constitution amendments it was submitted that it defines "tax on sale or purchase of goods" an expression appearing in the constitution in the constitution in the context of levy of sales tax. This has no impact on laws other than laws on tax on sale or purchase of goods. The amendment has introduced the context of "deemed sales. It does not alter the meaning of sale in the Sale of Goods Act or other enactment, including the law on service tax. The Supreme Court has the case of State of Maharashtra Vs. Laljit Rajshi Shah (2000) 2 SCC 699 held that legal fiction are created for some definite purpose and the fiction is to be limited to the purpose for which it was created and should not be extended beyond that legitimate field. Accordingly, it was submitted that legal fiction of deemed sale was introduced by the 46th constitution amendment for levy of sales tax and it has no application as regards interpretation of service tax provision. Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observation of the Supreme Court in these two cases are confined to the purpose of sales tax. 26. The judgment in the case of Kerala Colour Lab Association Vs. UOI, 156 ELT 17 is not against the Respondents. In that, the Hon'ble High Court simply disregarded the aspect of works contract and decided on the basis that the entire activity of the assessee as it answers the description of taxable photography service. In the case of the Respondents, the construction of a plant on turnkey basis is the service. Such service is not taxable at present. 27. In Rolls Royce Indus. Power (India) Ltd. Vs. CCE, 2004 (171) ELT 189, the Hon'ble CESTAT held that in a contract for operation and maintenance of power plant, the entire responsibility for generating and supplying power is with contractor. If there is any engineering issue arising during the discharge of the responsibility, it has to be sorted out and there is no service receiver for solving of engineering issues. Hence, no service tax is payable. In this judgment, the Hon'ble CESTAT rejected the SDR's contention about the 46th Constitution Amendment and held that the Apex Court's decision in Builders' Association ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire arguments will in to be applicable to this case also. 31. We have considered the submissions made by both the parties. We find that facts of the present case are squarely covered by the Tribunal decision in the case of Daelim industrial Co. cited supra and the department's SLP in the case of Daelim Industrial Co. has been dismissed by the Apex Court. Further the decision of the Daelim Industrial has been followed by this Tribunal in the case of M/s. L & T Ltd. Its ratio has also been referred to by the Gujarat High Court in the case of Elecon Engineering Co. Ltd. Vs. Union of India ELT 148 (Gujarat H. C.). Further, in Ircon International Ltd. Vs. CCE, Mumbai - 2002 (2) STT 264, Tribunal has held that construction contract could not be subjected to service tax as consulting engineering service, either as a whole or in part and further observed that position remains covered by the decision in the case of Daelim Industrial Co. cited supra. Revenue has not been able to distinguish the present contract from that involved in Daelim case because the contract in the present cases are essentially for construction and not for the services and the services referred to are an integ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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