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TMI Blog2023 (9) TMI 1255X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of material supplied has already been ascertained and VAT has been paid thereon, in that circumstances, we hold that for the period post 01.07.2002, the taxable value is to be determined in terms of Rule 2A(i)(c) of the Valuation Rules, 2006, therefore in view of the above, this issue is also answered in favour of the Appellant. In this case, it is an admitted fact that appellant has paid VAT on the spare parts supplied by the appellant. In that circumstances, the value of goods supplied is ascertainable as appellant has paid VAT thereon. Therefore, the said amount on which VAT has been discharged by the appellant is to be excluded from the value of the total contract to ascertain the value of taxable service provided by the appellant and the appellant has paid service by excluding the value of spare parts supplied by them. The differential demand of service tax is not sustainable in the light of the decision in the case of Gainwell Commosales Private Limited - Appeal allowed. - HON BLE SHRI ASHOK JINDAL, MEMBER (JUDICIAL) And HON BLE SHRI K. ANPAZHAKAN, MEMBER(TECHNICAL) Ms. Udita Saraf Shri Rahul Tangri, both Advocates for the Appellant (s) Shri S.Muk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... differential amount of consideration and actual value of spare parts for the period prior to 01.07.2012 or not? (b) Whether the appellant is liable to pay Service Tax on the value as per Rule 2A(i) (c) of the Service Tax Valuation Rules, 2006 or Rule 2A(ii) of the Rules? (c) Whether in the facts and circumstances of the case extended period of limitation is invocable or not? (d) Whether penalty can be imposed on the appellant or not? (a) Whether the appellant is liable to pay Service Tax on the differential amount of consideration and actual value of spare parts for the period prior to 01.07.2012 or not? 11. We find that it is a fact on record that maintenance and repair contracts were entered between appellant and TISCO is the composite contracts involving supply of goods as well as providing the service. In that circumstances, when there is a contract of supply of goods as well as services, the same was termed as works contract and the same was taxable w.e.f. 01.06.2007 under the category of works contract services as held by the Hon ble Apex Court in the case of Commissioner v. Larsen Toubro Ltd. [2015 (39) S.T.R. 913 (S.C.)]. Therefore, prior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes of commerce or industry; or (c) Construction of a new residential complex or a part thereof; or (d) Completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c); or (e) Turnkey projects including engineering, procurement and construction or commissioning (EPC) projects; 12. Section 67 of the Finance Act, 1994 was amended to read as follows :- Valuation of taxable services for charging Service Tax. - (1) Subject to the provisions of this Chapter, service tax chargeable on any taxable service with reference to its value shall, - (i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money, with the addition of service tax charged, is equivalent to the consideration; (iii) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. We have gone through the observations made by the Hon ble Apex Court and the definition of Works Contract Service. The activities undertaken by M/s. Xerox under various contracts in question for Maintenance and Repair and XGS i.e. Business Support Service / Business Auxiliary Service do not qualify as taxable service under Works Contract service, under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tracts 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. The relevant portions of the judgment are reproduced below : 24. A close look at the Finance Act, 1994 would show that the five taxable services referred to in the charging Section 65(105) would refer only to service contracts simpliciter and not to composite works contracts. This is clear from the very language of Section 65(105) which defines ―taxable service‖ as ―any service provided‖. All the services referred to in the said subclauses are service contracts simpliciter without any other element in them, such as for example, a service contract which is a commissioning and installation, or erection, commissioning and installation contract. Further, under Section 67, as has been pointed out above, the value of a taxable service is the gross amount charged by the service provider for such service rendered by him. This would unmistakably show that what is referred to in the charging provision is the taxation of service contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8213;taxable service‖, Section 66, which it is claimed is a charging section, and Section 67, the valuation provisions of the Finance Act, 1994, has to be rejected. We have, as already stated above, rejected the argument of the petitioners on bifurcation/vivisect and held that as per the provisions of Section 65(105)(zzq) and (zzzh), service tax is payable and chargeable on the service element of the contract for construction of industrial and commercial complexes and contract for construction of complexes as specified and in case of a composite contract, the service element should be bifurcated and ascertained and then taxed. The contention that the petitioners are paying sales tax or VAT on material in relation to execution of the contract under composite contracts for construction of industrial/commercial complexes and construction contracts as specified under Section 65(105)(zzq) and (zzzh) therefore fails. The contention that there was/is no valid levy or the charging section is not applicable to composite contracts under clauses (zzq) and (zzzh) of Section 65(105) stands rejected. But the petitioners have rightly submitted that only the service component can be brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) xxxxxxxx xxxxxxxx xxxxxxxx (b) xxxxxxxx xxxxxxxx xxxxxxxx (c) xxxxxxxx xxxxxxxx xxxxxxxx (d) xxxxxxxx xxxxxxxx xxxxxxxx (e) xxxxxxxx xxxxxxxx xxxxxxxx (f) Thus, Works Contract Services were brought under the service tax net as per an amendment to of the Finance Act, 1994 by introduction of Clause (zzzza) to Section 65(105). The said introduction was made pursuant to the Finance Act, 2007, which expressly made the service component in such works contract liable to service tax w.e.f. 1st June, 2007. The amendment was made to the said section of the Finance Act, 1994 by which works contract which were indivisible and composite could be split so that only the labour and service element of such contracts would be taxed as service tax. 22. As already noted, the definition of works contract was brought under the service tax net as per Section 65(105)(zzzza) of the Finance Act, 1994 by the insertion of the said definition. The said introduction was made pursuant to the Finance Act, 2007, which expressly made the service element in such works contract liable to service tax w.e.f. 1st June, 2007. By the said amendment, works contract which were in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court in Larsen Toubro and Total Environment Building Systems 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. 13. As it has been held that post 01.06.2006 also the activity of maintenance and repairs if provided along with material, in that circumstances the appropriate classification is under works contract service and demand under the category of maintenance and repair service is not sustainable. Therefore, we hold that prior to 01.07.2012, the appellant is not liable to pay Service Tax in question. Accordingly the demand for the period prior to 01.07.2012 confirmed by the impugned orders are set aside. Accordingly, this issue is answered in favour of the Appellant. (b) Whether the appellant is liable to pay Service Tax on the value as per Rule 2A(i) (c) of the Service Tax Valuation Rules, 2006 or Rule 2A(ii) of the Rules? 14. For better appreciation of the facts Rule 2A of the Service Tax (Determination of Value) Rules, 2006 is inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of works contracts entered into for execution of original works, service tax shall be payable on forty per cent of the total amount charged for the works contract; [Provided that where the amount charged for works contract includes the value of goods as well as land or undivided share of land, the service tax shall be payable on thirty per cent. of the total amount charged for the works contract.] [(B) in case of works contract, not covered under sub-clause (A), including works contract entered into for, - (i) maintenance or repair or reconditioning or restoration or servicing of any goods; or (ii) maintenance or repair or completion and finishing services such as glazing or plastering or floor and wall tiling or installation of electrical fittings of immovable property, service tax shall be payable on seventy per cent. of the total amount charged for the works contract.] 15. We find that Rule 2(1)(c) prescribed that where VAT/Sales Tax has been paid or payable on actual value of the property goods transferred in execution of works contract, then the such value adopted for the purpose of payment of Value Added Tax or Sales Tax shall be ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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