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TMI Blog2019 (2) TMI 1037X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of all the three contracts were made prior to 07.07.2009. Needless to say that there is no separate payment under the umbrella contract because it was only a combination of the other three contracts - There are indeed three different contracts and for which three different payments were to be made and were made. The umbrella agreement only combines all these three agreements so as to give a complete perspective of the scope of the contract. In fact, there is no payment whatsoever under the umbrella agreement. Further, the advances in respect of the three contracts were received prior to 07.07.2009 and hence the amended provisions do not apply. In view of the above, the value of the material supplied under off-shore and on-shore contracts cannot be included in the value of the works contract service as the advance payment in respect of all the three contracts are received prior to 07.07.2009. Appeal allowed - decided in favor of appellant. - APPEAL No. ST/22281/2015 - A/30112/2019 - Dated:- 9-1-2019 - Mr. M.V. RAVINDRAN, MEMBER (JUDICIAL) And Mr. P.V. SUBBA RAO, MEMBER (TECHNICAL) Shri Vipin Kumar Jain, Advocate for the appellant Shri A.V.L.N. Chary, Superi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod 2008-09 to 2013-14. Penalties were also proposed to be imposed under sections 76 77. It was also proposed to recover interest under section 75 of the Finance Act, 1994. After following due process, Ld. Commissioner confirmed the demands and interest and imposed penalties as proposed. Hence this appeal. 3. Ld. Counsel for the appellant submits that there was no artificial division of their contract into four separate contracts by them. Their client, M/s APPDCL, a Government undertaking, had clearly invited bids and the Letter of Intent required them to enter into three contracts namely offshore supply contract, onshore supply contract and service contract as well as umbrella agreement to integrate the three contracts. As far as onshore supply and offshore supply contracts are concerned, they supplied equipment to APPDCL who, in turn, gave the equipment back to them for installation as per the service contract. The service contract itself has provided for supply of steel and other materials required for erection and commissioning. Prior to 01.07.2012, they had discharged the service tax under works contract composition scheme on the civil works including the material. Post 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of goods and the labor charges), thus reducing the value of works contract for the purposes of calculating service tax. In order to plug this loophole, the Explanation appearing in sub-rule (3) is being amended to provide that the composition scheme would be available only to such works contracts where the gross value of works contract includes the value of all goods used in or in relation to the execution of works contract whether received free of cost or for consideration under any other contract. This condition would not apply to those works contracts, where either the execution of works contract has already started or any payment (whether in part or in full) has been made on or before the date of the amendment, i.e. 07.07.2009, from which the said amendment becomes effective (refer notification No.23/2009-ST dated 07.07.2009). 4. He further argued that prior to 07.07.2009, the supply of material by the service recipient could not have been included even if there was artificial division of contracts as has been explained by CBEC in the above circular. He further takes us through the contracts which they have entered into and submits that, as clarified by the Board, thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat after receipt of balance equipment, the title/ownership of the same is transferred to the service recipient. Accordingly, adjudicating authority cannot go beyond the C.B.E. C. Circular No. 150/1/2012-S.T., dated 8-2-2012 wherein it has been clarified that for the works contract executed before 7-7-2009, free of cost supplies are not required to be added to the gross amount, for the purpose of payment of Service Tax. There is no evidence on record to convey that both, the supply contract and the construction contract were artificially bifurcated after introduction of explanation to Rule 3(1) of Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. 10. The Hon ble Supreme Court in the case of UOI v. Mahindra and Mahindra Limited [ 1995 (76) E.L.T. 481 (S.C.)] in Para 5 has held as follows :- 5. The main thrust of the arguments of the learned Solicitor General before us was that the price for the sale of CKD packs by the foreign collaborator to the respondents is not the true price. In other words, the price fixed or mentioned in the invoices was not the sole consideration for the sale of CKD packs, for the various reasons stated by the Assistan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t also in dispute that in addition to the supply, the appellant had discharged VAT/CST as the case may be in respect of the supply contracts. The only question remains to be answered is whether the value of this onshore and offshore supplies by the appellants need to be included in the value of services rendered by them under the works contract scheme. It is not in dispute that the material in question was supplied by the appellant with respect to this particular contract and after the supply was completed, the goods which were supplied were given by APPDCL back to appellant for execution of the contract. A plain reading of CBEC circular D.O.F. No. 334/13/2009-TRU, dated 06.07.2009 explains that such values became includible in the value of the works contract as per the amendment made vide notification NO. 23/2009-ST, dt. 07.07.2009. By inserting an explanation, it was also clarified by CBEC themselves that the inclusion of the values would not apply to such contracts where either the execution of works contract has already started or any payment (whether in part or in full) has been made on or before 07.07.2009. In this particular case, the payments in respect of all the three con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other words, the adjudicating authority held that the three contracts in question are essentially part of the same contract and they were signed on 12.08.2009, hence the explanation w.e.f. 07.07.2009 to Rule 3 of the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007 is not relevant. On a plain reading of the contracts in question, we do not find it so. There are indeed three different contracts and for which three different payments were to be made and were made. The umbrella agreement only combines all these three agreements so as to give a complete perspective of the scope of the contract. In fact, there is no payment whatsoever under the umbrella agreement. Further, the advances in respect of the three contracts were received prior to 07.07.2009 and hence the amended provisions do not apply. In view of the above, we find that the value of the material supplied under off-shore and on-shore contracts cannot be included in the value of the works contract service as the advance payment in respect of all the three contracts are received prior to 07.07.2009. 9. We also find that this case is identical to the case of ESSAR Projects (India) Limited (supra) in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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