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TMI Blog2023 (4) TMI 348X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. 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 princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and service portion and were not paying service tax on supply portion. Statement of Shri Dipak Patel, Manager (Finance Accounts) was recorded. After detail investigation, show cause notice dated 23.10.2012 was issued proposing the Service tax demand along with interest and penalties. In adjudication, the Commissioner vide Order-In-Original No. STC/38/COMMR/2013 dated. 04.10.2013 confirmed the demand with interest and imposed penalties. Being aggrieved by the said order, Appellant preferred appeal before CESTAT, Ahmedabad. Vide Order No. A/10865/2014 dated 23.04.2014 the CESTAT remanded the matter back to the adjudicating authority to consider the issue afresh after following the principles of natural justice. 2.1 In the meantime, relevant information was called for by their jurisdictional officers vide letters dated 20.11.2012 and 10.12.2012 to ascertain if the Appellant was following the same practice for short payment of service tax and wrong availment of exemption Notification No. 12/2003 for the period subsequent to the period covered under the aforesaid SCN dated 23.10.2012 or otherwise. Scrutiny of the documents submitted by the Appellant revealed that during the FY 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly to look into the voluminous records and find out the fact whether or not the appellant had paid service tax on the services rendered and paid VAT on the material supply portion. In earlier proceeding Learned Commissioner came to the conclusion that Appellant had not produced any evidences in support of such claim. The direction conveyed by Tribunal are very clear when it is observed that . remand the matter back to the adjudicating authority to reconsider the issue afresh by going into all the claims by the appellant as regards discharge of VAT on supply portion and discharge on Service Tax on the services portion . However Learned Commissioner without appreciating the basic issue on the factual matrix has jumped to the conclusion in the similar fashion as was done by his predecessor, thus, exhibiting absolute non application of mind on his part. 3.1 As regard the findings of Learned Commissioner on the classification of Erection, Commissioning or Installation Service as Works Contract Service even for the period prior to 01.06.2007, he submits that the law is well settled in this regard that for the contracts which have been entered into prior to 01.06.2007 and service p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by them with the service receivers after 01.06.2007, the appellant have classified the service under works contract service, the service tax has been paid under composite scheme. The third category of contracts which are only for providing service, the appellant have classified the contracts under Erection, Commissioning and Installation Service and paid the service tax at the full rate. In support of this Appellant submitted the detail worksheet along with copy of invoices for sales and service in respect of contracts. 3.4 As regard the finding of Learned Commissioner in para 25.1 that Appellant have been taking contradictory stand for availment of benefit of Notification No. 12/2003-ST, he submits that fundamental question is that if the services were being correctly classified under the Erection, Commissioning and Installation or Works Contract Service depending upon the nature of the contract, were the appellant require to pay service tax on the value of materials supplied free of cost by the service receiver. It has never been the intention of the legislature to demand service tax on the value of the goods and materials. Even when the services are classified under Erect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his value while issuing sales invoices to JPL. 3.6 He also submits that each contract which is the subject matter in show cause notices, in most of contracts, the clients i.e. the service receiver had themselves bifurcated each contract in two parts i.e. one for value for the goods and materials to be supplied and two the value for the service. In respect of all such contracts, the appellant have paid service tax at full rate on the value of service without availing any exemption or abatement. The allegation of department and findings of the Learned Commissioner that the Appellant had bifurcated the value is not correct. However from the contracts it will be appreciated that in all these contracts the value has been bifurcated by the clients i.e. service receiver. It is well settled legal position that when there is contract between two parties, third person who is not involved in the contract cannot interfere with the terms of the contract. The contract has to be accepted as legally tenable. Appellant paid service tax on the full value of service, hence there was no need for the appellant to take abatement under Notification No. 12/2003-ST. The finding of Learned Commissioner i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces, the Appellant have provided figures of sales value under each contract and value on which VAT/CST is paid which is clearly evident from the worksheet annexed. Hence, the Appellant are legally eligible for deduction of such value before demanding service tax. 3.8 He further relied upon the following judgments in supports of above submission and arguments. SAFETY RETREADING CO. PVT. LTD. VS. COMMISSIONER OF C.EX., SALEM 2017 (48)STR 97(SC) COMMISSIONER OF C.EX., PUNE I VS. BIOPHARMAX INDIA PVT. LTD. 2016(42) STR 77 (TRI. MUMBAI) J.P. TRANSFORMERS VS. COMMISSION OF C.EX S.T. KANPUR -2014(36)STR 471 (TRI. DEL.) COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE VS. J.P. TRANSFORMERS 2014(36)STR 961(ALL) SPACE AGE ASSOCIATES VS. UNION OF INDIA 2014 (33) STR 372 (BOM) TECHNOCRATE TRANSFORMERS VS. COMMISSIONER OF C.EX. KANPUR -2015(39)STR 996 (TRI. DEL.) SOBHA DEVELOPERS LTD. VS. COMMR. OF C.E. SERVICE TAX, BANGALORE -2010(19)STR 75 (TRI. BANG.) COMMISSIONER VS. SOBHA DEVELOPERS LTD. 2017(49)STR J 26 (SC) UNION OF INDIA VS. MAHINDRA MAHINDRA LTD. 1995(76)ELT 481 (SC) ESSAR PROJECT (INDIA) LTD. VS. COMMISSIONER OF C.EX. SERVICE TAX, RAJKOT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GAIL and GSPL during the FY 2007-08 would be considered as taxable income and whether service tax of Rs. 15,60,153/- involved thereon would be payable by the said assesseealongwith applicable interest, in their capacity of a sub-contractor as demanded in the SCN dated 23.10.2012 or otherwise. (ii) Whether the amount of Rs. 20,55,26,239/- received by the said assessee from their client towards value of goods traded during the provisions of erection, commissioning and installation service in the FYs 2007-08 to 2010-11 would be considered as taxable income by disallowing them the benefits of Notification No. 12/2003-ST and whether Service tax of Rs. 2,26,04,332/- involved thereon would be payable by the said assessee along with applicable interest as demanded in the SCN dated 23.10.2012 or otherwise? (iii)whether the amount of Rs. 15,21,16,142/- received by the said assessee from their clients towards value of goods traded during the provision of erection, commissioning and installation service in the FY 2011-12 would be considered as taxable income by disallowing them the benefits of Notification No. 12/2003-ST and whether service tax of Rs. 1,01,48,866/- involved ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... every item separately. In terms of Notification No. 12/2003-S.T., dated 20-6-2003, the value of the goods and materials sold by the service provider to the recipient of services stand exempted from the service tax leviable therein, subject to the condition that there is documentary proof specifically indicating the value of the said goods and materials. 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. 5.3 The Learned Commissioner, in fact accepts the above proposition of law, but does not extend the benefit to the appellants on the ground that Notification No. 12/2013-ST provide a condition for non-availment of Cenvat Credit. Appellant following a practice wherein they procured goods by placing order to manufacturers, such manufacturer supply their goods under invoice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such goods and materials, he has paid an amount equal to such credit availed before the sale of such goods and material. In this regard, we are in agreement with the Appellant s view that above Notification restricted for availment of Cenvat Credit to Service provider only, the said Notification nowhere imposed the condition related to non- availment of cenvat credit to service recipient. Therefore, the benefit of exemption under Notification No. 12/2003-S.T. cannot be denied to Appellant. 5.4 In the present case, we also find that the Tribunal vide Order No. A/10865/2014 dated 23.04.2014 while remanding the matter in para 3 observed as under: 3. On perusal of the records, we find that the issue involved in this case is regarding service tax liability on the appellant under the category of erection, installation and maintenance Service on the contracts which were executed by them with different parties. It is the claim of the assessee before the adjudicating authority as well as before us that they had billed separately for the materials and for the services. It is also the claim that the Service Tax liability on the services rendered was discharged and VAT was discharged o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be levied on that portion of the value representing the sale of the goods on which sales tax has been charged. This position has been elaborately dealt with in the decision of the Shilpa Colour Lab v. CCE, Calicut reported in 2007 (5) S.T.R. 423 (T) supra. This view has been affirmed in many decisions. Once, the sales tax has been paid on the materials, then on the same, service tax also cannot be charged. At this stage, we also take note of the Board s Circular No. 96/7/2007-S.T., dated 23-8-2007 laying down that the value of spare parts sold by a service provider is not required to be taken into consideration if the same are subjected to levy of sales tax and VAT and there is clear evidence to show the sale of the same. Circular further goes on to say that the fact of payment of VAT/sales tax on a transaction value indicates that the said transaction is treated as sale of goods. Keeping in view the Board circular as also the precedent decisions of the Tribunal, we hold that the appellant are not liable to pay service tax on the value of supply of goods/ material. 5.7 As regard the service tax demand of Rs. 15,60,153/- we find that Learned Commissioner confirmed the said dem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice stands provided only once and as such tax is not payable twice for the same service. Further in the case of Sunil Hi-Tech Engineers Ltd. v. CCE, Nagpur reported in 2010 (17) S.T.R. 121 (Tri.-Mumbai), the service tax confirmed against the sub-contractor was set aside on the ground that the main contractor has already paid the Service Tax and the matter was remanded to verify the above effect. The same ratio was laid down by the Tribunal in the case of Newton Engg. Chemicals v. CCE, Vadodara reported in 2008 (12) S.T.R. 378 (Tri.-Ahmd.) and by the Larger Bench decision of the Tribunal in the case of Vijay Sharma Co. v. CCE, Chandigarh reported in 2010 (20) S.T.R. 309 (Tri.-LB). 5.8 However the Larger bench of Tribunal in case of Commissioner v. Melange Developers Pvt. Ltd. 2020 (33) G.S.T.L. 116 (Tribunal) held that the sub-contractors also needs to pay Service tax in their individual capacity. We observed that in the present matter appellant has acted as sub-contractor. Earlier, as mentioned above, there were contrary clarifications by the government that the sub-contractor is not liable to pay service tax when the main contractor is discharging the service tax. Subse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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