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TMI Blog2023 (5) TMI 764X X X X Extracts X X X X X X X X Extracts X X X X ..... tinction between the service contracts simpliciter and a composite works contracts which would involve both services and goods and held that it is only w.e.f. June 01, 2007 that composite contracts can be subjected to levy of service tax and not before this date. It has been found as a fact that the work order in the present case, involves both supply of services as also goods. It is, therefore, a composite contract. In view of the decisions of the Supreme Court in Larsen Toubro it has to be held that the services performed by the appellant under the work order would fall in the category of works contract service and not site formation service. The finding of the Commissioner on this issue, therefore, cannot be sustained and is set aside. Whether the appellant would be justified in availing CENVAT credit? - HELD THAT:- The Commissioner had examined documents to ascertain whether the appellant was justified in availing CENVAT credit, but in view of the finding recorded in this order that the appellant would not be liable to pay service tax, the appellant cannot avail the benefit of rule 3(l) of 2004 Rules. Penalty - HELD THAT:- Learned counsel for the appellant, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a portion of the work to the appellant by a work order dated July 08, 2005. The job to be performed by the appellant under the work order was of land development which involves earth work, excavation, back filling, site levelling, grading and disposal. 4. A show cause notice dated August 29, 2006 first show cause notice was issued to the appellant for the period July 2005 to August 2006 proposing a demand of service tax of Rs. 1,51,14,126/- on the allegation that the appellant had undertaken the activity of preparation of site for the power plant which would be covered under the category of site formation and clearance, excavation and earthmoving and demolition services as defined under section 65(97a) of the Finance Act, 1944 the Finance Act which was taxable under section 65(105)(zzza). The show cause notice was adjudicated upon by an order dated July 30, 2007 and the demand was confirmed. Payment of service tax through credit of Rs. 1,12,38,313/- was also rejected on the ground that the invoices against which credit was availed were not issued to the Bhilai premises of the appellant. 5. The second show cause notice dated January 18, 2008 was also issued to the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Appeal No. ST/92 of 2008 in the manner indicated aforesaid. Therefore consequence of appeal No. ST/92/2008 having bearing on this appeal, pleading of double taxation can be factually examined and both cases can be taken up for disposal commonly to appreciate totality of facts and circumstances. To grant a fair opportunity of defence, we make it clear to the appellant that the appellant shall appear before learned Adjudicating Authority and satisfy him that the gross value of service giving rise to tax demand of Rs. 61,44,148/-have been included in the gross value covered by appeal No. ST/92 of 2008 so that there shall not be over lapping of demand. If the appellant fails to satisfy the authority, consequence as that shall be proper under law shall follow. 3. In view of aforesaid observations, we remand this matter to the learned Adjudicating Authority to grant fair opportunity of hearing to the appellant and reconsider the issue of over lapping demand as well as consider the Cenvat credit disallowance made by order-in-appeal No. ST/851 of 2008. 8. Both the appeals were disposed of with the following observations : 4. We make it clear to the learned Adjudicating Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s brought into the tax net wef 01-06-2007 as also stated by the Noticee themselves. In the impugned proceedings against the Noticee the period involved i.e 08-7-2005 to 07-8-2006 in respect of the first Show Cause Notice dt.29-8-2006 and half yearly periods ended March' 2006 and September' 2006 in respect of the second Show Cause Notice dt.18-1-2008. As regards classification of services rendered by the Noticee during the material period, detailed discussions as at para 12.6 supra have brought home the fact that the impugned services were classifiable under Site Formation service. 12. In regard to the issue as to whether the appellant has correctly availed the CENVAT credit facility, the Commissioner observed as follows : 17. The aspect of admissibility of Cenvat Credit to the Noticee has been dealt with at length in the earlier adjudication proceedings. However, as the case has been remanded with a direction to discuss the issue of Cenvat Credit availability, l am taking up the issue again. 17.1 The facts of the case reveal that the Noticee had availed total Cenvat Credit of Rs.11686444/- (Basic Rs.11505298/- plus Ed. Cess of Rs.181146/-) on the various it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant. Learned counsel also submitted that penalty could not have been imposed on the appellant. 16. Shri Prashant Kumar, learned authorized representative appearing for the Department, however, supported the impugned order and submitted that it does not call for any interference in this appeal. Learned authorized representative, elaborating his submissions, contended that from a bare perusal of the work order it is more than apparent that the nature of work performed by the appellant would fall under the category of site formation service and that the Commissioner was justified in holding that the appellant could not have taken CENVAT credit. 17. We have considered the submissions advanced by the learned counsel for the appellant and the learned authorized representative appearing for the Department. 18. The resolution of dispute in the present appeal would depend upon the nature of work that was to be performed by the appellant under the work order dated July 08, 2015. It would, therefore, be useful to reproduce the relevant portion of the work order awarded by BHEL to the appellant and the same is as follows : Job : LAND DEVELOPMENT (EARTH WORK ESCAVATION, BAC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material within a lead of 1km etc. complete as per specification, drawing and as directed by the engineer. 9,593,280 3. 102(b) Earth work in excavation for leveling and grading beyond 2m upto 4m depth below ground level in all types of soil including laterite, moorum, ash etc. which can be excavated by means of crow bar, pick axe etc. but does not require chiseling or (and) blasting including setting out, dressing the sides, leveling to grade and ramming/compacting the bottom, leveling, approaches, stacking/disposal of surplus excavated material within a lead of 1km etc. complete as per specification, drawing and as directed by the engineer. 548,775 4. 103 Disposal of surplus excavated earth beyond an initial lead of 1km and upto a lead of 5 km including leveling the disposal material etc. all complete as per specification and as directed by the engineer. 45,000 5. 105 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It specifies that borrowed good earth has to be arranged by the contractor at its own cost. There can be no manner of doubt that the work order comprises both the service element as well as the goods element. 21. Keeping this in mind that it has to be examined whether the work to be performed would actually fall under the category of site formation service. Site formation has been defined in section 65(97a) of the Finance Act in the following manner : (97a) site formation and clearance, excavation and earthmoving and demolition includes, (i) drilling, boring and core extraction services for construction, geophysical, geological or similar purposes; or (ii) soil stabilization; or (iii) horizontal drilling for the passage of cables or drain pipes; or (iv) land reclamation work; or (v) contaminated top soil stripping work; or (vi) demolition and wrecking of building, structure or road, but does not include such services provided in relation to agriculture, irrigation, watershed development and drilling, digging, repairing, renovating or restoring of water sources or water bodies;] 22. The Supreme Court in Larsen Toubro in paragr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of VAT. The rule goes on to say that the service component of the works contract is to include the eight elements laid down in the second Gannon Dunkerley case including apportionment of the cost of establishment, other expenses and profit earned by the service provider as is relatable only to supply of labour and services. And, where value is not determined having regard to the aforesaid parameters, (namely, in those cases where the books of account of the contractor are not looked into for any reason) by determining in different works contracts how much shall be the percentage of the total amount charged for the works contract, attributable to the service element in such contracts. It is this scheme and this scheme alone which complies with constitutional requirements in that it bifurcates a composite indivisible works contract and takes care to see that no element attributable to the property in goods transferred pursuant to such contract, enters into computation of service tax. 40. Finally, in para 31, the Delhi High Court holds :- The contention of the petitioners that the impugned notifications override the statutory provisions contained in Section 65(105), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India read with Article 248 of the Constitution. The service tax provisions have the following basic scheme: (i) Section 65 of the Act provides for taxable services; (ii) Section 66 of the Act provides for the charge of service tax by the person designated as the person responsible for collecting the service tax for the Government; (iii) Section 67 of the Act provides for the value of taxable service which is to be subjected to 5% service tax; and (iv) Section 68 of the Act provides for the collection and payment mechanism for service tax. It is necessary to trace the evolution of charging service tax on works contract as discerned by this Court in the aforesaid judgments. While considering the rival contentions of the parties, it is also necessary to examine the issue of levying service tax on contracts said to be in the nature of works contract, both prior to, and following the introduction of an express charging provision to impose tax on works contract although we are concerned with the period prior to the definition of works contract w.e.f. 1st June, 2007 to Finance Act, 1994. This is with reference to the following judgments : (a) xxxxxxxx xxx ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce tax on works contract was leviable is not correct. It was being levied on purely service contract and not on service element of works contract as there was no definition of a works contract till then. Hence, the amendment made to the Finance Act, 1994 by insertion of the definition of works contract as under clause (zzzza) is not clarificatory in nature. Having found that the Service Tax was not at all leviable on service element of a works contract, Parliament felt the need for the amendment and was so incorporated by the Finance Act, 2007. 27. Thus, the judgment in Larsen and Toubro Ltd. (supra) has been correctly decided and does not call for a re-consideration insofar as the period prior to 1st June, 2007 is concerned. In view of the above discussion, I agree with the result arrived at by His Lordship M.R. Shah J. vis-a-vis allowing all civil appeals under consideration except Civil Appeal No. 6792 of 2010 which is dismissed. No costs. 24. It has been found as a fact that the work order in the present case, involves both supply of services as also goods. It is, therefore, a composite contract. In view of the decisions of the Supreme Court in Larsen Toubro and Tot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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