9911796707
TMI Blog2024 (3) TMI 231X X X X Extracts X X X X X X X X Extracts X X X X ..... 07.07.2009 i.e. 19.02.2008 and 04.12.2008 and it is not in dispute that the appellant started execution of works prior to 07.07.2009 and raised invoices and also received payments thereof. In that circumstances, the CBEC Circular No.150/1/2012-ST dated 08.02.2012 is relevant to decide the present issue - As per the said Circular, the explanation has been appended to Rule 3 (1) of the Composition Scheme, which clearly shows that the contract entered prior to 07.07.2009, the value of cost of free supply will not be includible to determine the gross amount for the purposes of payment of service tax. As it is evident that all the contracts were entered by the appellants with the service recipient prior to 07.07.2009 and the invoice has been issued and the payment was also received. In that circumstances, in terms of CBEC Circular No.150/1/2012-ST dated 08.02.2012, the value of supply of goods contract, which were executed by the appellant and the same were given to the appellants for execution of Contract II, were the contract value, in that circumstances, the value of goods in Contract I cannot be included for determination of gross value for payment of service tax. Therefore, the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply of goods, the appellant considered these contracts as works contract and opted to pay the service tax on Contract II under Rule 3 of Works Contract (Composition Scheme for payment of service tax) Rules, 2007 as Composition Scheme . Accordingly, the appellant paid the service tax on the gross value of the consideration under Contract II at the time of composition rate of tax prescribed under the Composition Scheme. 2.6 These contracts with APCPL and DVC were executed on 19.02.2008 and 04.12.2008 and the works started commencing prior to 07.07.2009. 2.7 Against these two Contracts, two show-cause notices were issued to the appellants demanding service tax from the appellant alleging that even if the appellant has entered into two separate contracts for sale of goods/supply and works contract services, the value of goods sold under Contract I would be required to be included in the gross amount charged under Contract II for the purposes of payment of service tax under the Composition Scheme. The notices also invoke extended period of limitation. 2.8 The matter was adjudicated and the demand of service tax was confirmed on gross value of Contract I Contract II i.e. sale of good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rks contract as per the statutory definition of the term works contract. 3.4 He further submitted that such a proposition is not correct in law because first of all, the sale-simplicitor contract i.e. Contract I is not a works contract and second, the appellant sells goods under Contract I, property in which gets transferred to the buyers as soon as the goods are handed over to the transporter. Till this time i.e. the time when sale gets complete, there is no element of service involved. The goods so sold are thereafter handed over to the appellant in trust and for execution of services under Contract II. Therefore, the explanation will get triggered only when the contract is a works contract which in the present case it is not. To attract explanation, another cumulative test of the appellant supplying the goods under works contract for a consideration or otherwise needs to be satisfied. The explanation is not applicable when the goods are sold but it applies when they are merely supplied i.e. the case of a works contract. 3.5 He further submitted that the impugned order relying on gross fall breach clause is not of any significance in the present case as the contract has to be fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar is extracted below : Meaning of expression gross amount as per Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 Regarding Circular No. 150/1/2012-S.T., dated 8-2-2012 F.No. 354/236/2010-TRU Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs, New Delhi Subject : Meaning of the expression gross amount appearing in Rule 3(1) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, as it stood prior to 7th day of July 2009 - Regarding. Reference has been received from a field formation seeking clarification as to whether gross amount , for the purpose of payment of service tax under the Works Contract Composition Scheme, included the value of free of cost supplies, for the period prior to 7-7-2009. 2. The issue has been examined. The meaning of the expression gross amount appearing in Rule 3(1) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, is qualified by the Explanation inserted in the said Rule with effect from 7-7-2009. Since the Explanation inserted in Rule 3(1) with effect from 7-7-2009 is clarificatory and prospective in nature, inclusion of val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Balance of Plant shall be transferred to the Owner upon Delivery by the Supplier of that item of the Balance of Plant at the Site and upon endorsement of the documents required under Article 15.1. 9.2 In view of the above clause of the supply contract, the findings of the adjudicating authority that ownership of the Balance of Plant and items stands transferred only at the time of completion of work, is not correct. In the case of imported equipments as well as the Balance of Plant equipment, the ownership/title lies with the service recipient when the same are received at site. Accordingly, it has to be held that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd apparently it has to be accepted as the real state of affairs. 12. The judgment of ITAT relied upon by the Revenue is not applicability to the facts of this case because the Income Tax law is applied in altogether in a different sphere of taxation whereas, the Service Tax liability and determined of value under Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, constitute an altogether a different area of operation. Based on the above observations, it is concluded that both the contracts dated 24-8-2007 for Supply of equipments and Construction of works has to be treated as distinct and separate contracts and value of supply contract cannot be added to the value of the construction contract for the purpose of Service Tax liability. 13. In view of the above, appeal filed by the appellant is allowed and cross-objection filed by the Revenue is rejected. 8. Further, in the case of Tata Projects Limited (supra), this Tribunal has again examined this issue and observed as under : 7. We have considered the arguments on both sides and perused the records. There is no dispute on the facts of the case that the appellant had entered into three agreements with M/s A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of Service Tax) Rules, 2007. In view of the findings above and nature of EPC works contract service and the existence of only one contract No. for all the supply and the service contracts, the scope of supply/work being the same i.e. basic and detailed design, engineering, procurement, manufacture, assembly, pre assembly, inspection, tests at contractors and/or his sub vendors works, shock painting, packing, transportation to site, freight and insurance of balance of plant systems and equipment package for 2 x 800 W thermal power plant ; that the assessee is responsible for installation of the whole facility under the EPC contract by using the Off-shore supply and On-shore supply procured by the assessee themselves, and therefore, the contracts have to be considered as one. In this regard, it is observed that both, supply contract and service contract have no separate defects liability clauses and the total price of the Contract, price variation being for the total price of the contract, and the Liquidated Damages applicable for the entire and complete Design, Engineering, Procurement, manufacture supply, erection, testing, commissioning, initial operation, reliability opera ..... X X X X Extracts X X X X X X X X Extracts X X X X
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