9911796707
TMI Blog2023 (9) TMI 1255X X X X Extracts X X X X X X X X Extracts X X X X ..... was composite contracts for supply of spare as well as repair and maintenance jobs, for which the appellant charged maintenance and onsite support site charges. Further, the appellant also charges per hour basis towards supply of spare parts. The appellant discharged VAT on the entire value of spare parts supplied to TSL. The show cause notice was issued to the appellant on 29.09.2010 proposing demand of service tax by invoking extended period of limitation alleging that the appellant has arbitrarily split the gross amount of the agreement towards spare parts and supply of service and that the appellant had inflated the value of spare parts charges and included the value of onsite management services in the value of spare parts and thus evaded payment of service tax. The matter was adjudicated, demand of service was confirmed. Against the said order, the appellant is before us. 3. The Ld.Counsel for the appellant submits that the said issue has been decided by this Tribunal in the case of Gainwell Commosales Private Limited v. Commissioner of Central Excise & Service Tax, Ranchi [2023-VIL-600-CESTAT-KOL-ST]. Therefore, the impugned order is not sustainable. 4. Heard the parties, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... classifiable under works contract service. Whether services under works contract service is taxable or not this Tribunal has observed has under:- "We find that for the first time Section 65(105)(zzzza) set-out to tax the service as Works Contract service for levy of service tax on the works executed along with the material and the said condition is enumerated hereunder :- "11. By the Finance Act, 2007, for the first time, Section 65(105)(zzzza) set out to tax the following :- "(zzzza) to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams. Explanation : For the purposes of this sub-clause, "works contract" means a contract wherein, - (i) Transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and (ii) Such contract is for the purposes of carrying out, - (a) Erection, commissioning or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise, installation of electrical and electronic devices, plumbing, drain laying or other install ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axable 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 contracts simpliciter and not composite works contracts, such as are contained on the facts of the present cases. It will also be noticed that no attempt to remove the non-service elements from the composite works contracts has been made by any of the aforesaid Sections by deducting from the gross value of the works contract the value of property in goods transferred in the execution of a works contract. 25. In fact, by way of contrast, Section 67 post amendment (by the Finance Act, 2006) for the first time prescribes, in cases like the present, where the provision of service is for a consideration which is not ascertainable, to be the amount as may be determined in the prescribed manner. 26. We have already seen that Rule 2(A) framed pursuant to this power has followed the second Gannon Dunkerley case in segregating the 'service' component of a works contract from the 'goods' component. It begins by working downwards from the gross amount charged for the entire works con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nspires from a perusal of Annexure ‗A' is that the work order is a composite contract comprising services as well as goods. This would be clear from serial no. 6 which mentions ‗Earth work in excavation for levelling and grading using borrowed good earth'. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omponent. It begins by working downwards from the gross amount charged for the entire works contract and minusing from it the value of the property in goods transferred in the execution of such works contract. This is done by adopting the value that is adopted for the purpose of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Building Systems and the relevant paragraphs of the judgment are reproduced below : "20. Service tax was introduced in India vide the Finance Act, 1994. Service tax is legislated by Parliament under the residuary entry i.e. Entry 97 of List I of the Seventh Schedule of the Constitution of 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 26. Therefore, reliance placed by the assessees in the present case on the aforesaid judgments is just and proper. On the other hand, the contention of Ms. Diwan, Learned ASG to the effect that even prior to the aforesaid amendment being made to the Finance Act, 1994 service 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de, - (i) labour charges for execution of the works; (ii) amount paid to a sub-contractor for labour and services; (iii) charges for planning, designing and architect's fees; (iv) charges for obtaining on hire or otherwise, machinery and tools used for the execution of the works contract; (v) cost of consumables such as water, electricity, fuel used in the execution of the works contract; (vi) cost of establishment of the contractor relatable to supply of labour and services; (vii) other similar expenses relatable to supply of labour and services; and (viii) profit earned by the service provider relatable to supply of labour and services; (c) where value added tax or sales tax has been paid or payable on the actual value of property in goods transferred in the execution of the works contract, then, such value adopted for the purposes of payment of value added tax or sales tax, shall be taken as the value of property in goods transferred in the execution of the said works contract for determination of the value of service portion in the execution of works contract under this clause; (ii) Where the value has not been determined under clause (i), the pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2, 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. (c) Whether in the facts and circumstances of the case extended period of limitation is invocable or not? 16. As whole case is interpretation of the provisions of Service Tax (Determination of Value) Rules, 2006 and classification of the services therefore we hold that extended period of limitation is not invocable in the facts of the present case. Accordingly, the said issue is also answered in favour of the appellant. (d) Whether penalty can be imposed on the appellant or not? 17. In the facts and circumstances of the present case, no penalty is imposable on the appellant. Accordingly, same is answered in favour of the appellant. In view of the above discussions, we set aside the impugned orders as all the issues have been answered in favour of the appellant, and allow the appeals filed by the appellant." 6. We find that 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
