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TMI Blog2024 (4) TMI 628X X X X Extracts X X X X X X X X Extracts X X X X ..... ly of goods is clearly and independently a transection of sale of goods which has no connection with the provision of service. In the present case the contract of the service namely erection, commissioning, installation service being a pure service the same is not exigible to Sales Tax, VAT/CST etc. as per the law therefore the condition Number 2 above is also not applicable therefore in the present case being a service simpliciter as per the separate contract the same is not classifiable under works contract service. The appellant have admittedly paid the service tax on the erection, commissioning, and installation at the applicable rate of service tax therefore the allegation of the department that the appellant have not included the value of goods in the works contact service is incorrect. This issue has been considered by the Hon'ble Supreme Court, in BSNL v. Union of India [ 2006 (3) TMI 1 - SUPREME COURT] , wherein it has held that works contracts involved a kind of service and sale at the same time. In such a case, the splitting of the service and supply was constitutionally permitted. Further, it has been held that if there is an instrument of contract which may be comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Mar 2013 28,27,737 27.02.2015 08.01.2018 Apr 2013 to Dec 2013 29,55,754 3 12959/2018 19.01.2015 Jan 2014 to Oct 2014 11,76,717 09.11.2015 13.08.2018 4 10302/2019 02.05.2016 Nov 2014 to Dec 2015 8,54,317 27.03.2017 27.11.2018 Total 5,79,17,675 1.1 The brief facts of the case are that the Appellant is engaged, inter alia, in the manufacture of cooling towers and parts. The Appellant also provides consulting engineers, maintenance repairs, erection, commissioning and installation services, works contract services etc. The Appellant is registered with the department under excise registration No. AAACT2254QXM001 and as service provider vide registration number AAACT2254QST002.The Appellant either enters into three types of contracts for supply of parts of cooling towers or executes works contract for erection, installation and commissioning of cooling towers at their customer's site, the details whereof are as follows:- (i) Type 1-Order for supplying of cooling towers and parts thereof; (ii) Type 2-Separate orders for supply of cooling towers and separate orders for carrying out erection, installation and commissioning of the cooling towers; (iii) Type 3 Single orders, showing sep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the subject goods. 1.4 Pursuant to the above, show cause notices were issued to the Appellant, demanding service tax on the said price differential in respect of the goods sourced from independent suppliers and supplied to the customer's site. It was alleged that the said supply of goods is a part of the works contract carried out by the Appellant. The Ld. Adjudicating Authority vide its Orders-in-Original confirmed the demand for service tax along with interest and penalties. Further, the Ld. Commissioner (Appeals) also upheld the demand for service tax along with interest and penalties. 1.5 Hence, the present appeals. 2. Shri Prakash Shah Learned Counsel with Shri Mohit Rawal Advocate appearing on behalf of the appellant made the following submission:- THE SHOW CAUSE NOTICES ISSUED FOR THE PERIOD FROM OCTOBER 2012 TO DECEMBER 2015 INVOKE INCORRECT PROVISIONS 1. It is submitted that the show cause notices issued for the period from October 2012 to December 2015 invoke incorrect provisions of the law and therefore, the entire demand based on such incorrect show cause notices is liable to be set aside. 2. From a bare perusal of the show cause notices pertaining to the peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and installation, which are independent to each other. Thus, the contract is not a singular transaction of works contract but involves two separate transactions of sale and installation. 10. In Contract Type 3, although a single purchase order is involved, the value for supply of goods and erection, installation and commissioning is separately indicated. Thus, the subject transaction is not singular and indivisible but instead involves two distinct values, one for sale and other for service. 11. In this regard, it is pertinent to note that the Appellant has discharged the appropriate excise duties (where self-manufactured) and sales tax / VAT/CST on the value of goods supplied to the customer and has discharged service tax on the value of services involved as distinctly identified in the purchase orders. He placed reliance on the following judgments:- BSNL v. Union of India (2006 (2) STR 161 (SC) Commissioner of Central Excise, Raipur v. BSBK Pvt. Ltd. (2010 (18) STR 555 (Tri.- LB) 14. In the present case, it is submitted that both the Contact Type 2 and Type 3 clearly bifurcate the goods and service portion which is required to be executed by the Appellant. He placed reliance on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed under Rule 2A(i) of the Valuation Rules. 23. Thus, the Respondent/Ld. Commissioner (A) has erred in confirming the demand of service tax on the value of goods supplied by the Appellant to the customers under the subject contracts. THE SAME TRANSACTION CANNOT BE SUBJECT TO BOTH SERVICE TAX AND VAT 24. In any event, it is submitted that the Appellant has discharged the VAT/CST /Sales Tax liability on the sale value of the goods supplied to its customers and thus, the same cannot be subjected to service tax again. He placed reliance on the following judgments:- Imagic Creative Pvt. Ltd. v. Commissioner of Commercial Taxes [2008 (9) STR 337 (SC) Commissioner of Service Tax-V, Mumbai v. UFO Moviez India Ltd. [2022 (61) GSTL 4 (SC) Nayana Premji Savla v. Union of India [2022 (66) GSTL 417 (Bom.) 25. In the present case, admittedly, the Appellant has discharged the appropriate sales tax/VAT/CST liability on the supply of goods to its customers. It is submitted that the high seas sale and sale in-transit are treated as interstate sale of goods under the CST Act. 26. It is pertinent to note that the said interstate sale being made by way of transfer of documents of title during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt as well as the Hon'ble High Courts and is thus a highly interpretational issue Thus, extended period of limitation cannot be invoked in the facts and circumstances of the case and the demand raised in the first show cause notice is barred by limitation. 35. The Appellant also submits that in the absence if any wilful suppression, and contraventions of provisions of Central Exe Act, 1944, CCR and other allied rules, penalty under Section 78 of the Act is not imposable. 36. in view of the submissions made above, it is manifest that no service tax is payable on the profit margin of the goods supplied to the customers it is a settled position in law that no penalty can be impound where there is no demand. Coolade Beverages Limited, (2004) 172 ELT 451 (All)] Thus, no penalties can be imposed on the Appellant under Section 76 and 77 of the Act. 37. Further, in the present case, the Appellant is not liable to pay any service tax and thus, the question of levying interest under the provisions of Section 75 of the Act does not arise. 38. The Appellant prays for allowing the appeals. 3. Shri Rajesh Nathan, Learned Assistant Commissioner (AR) appearing on behalf of the revenue reiterat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sifiable under works contract service. The appellant have admittedly paid the service tax on the erection, commissioning, and installation at the applicable rate of service tax therefore the allegation of the department that the appellant have not included the value of goods in the works contact service is incorrect. 4.2 This issue has been considered by the Hon'ble Supreme Court, in BSNL v. Union of India (Supra), wherein it has held that works contracts involved a kind of service and sale at the same time. In such a case, the splitting of the service and supply was constitutionally permitted. Further, it has been held that if there is an instrument of contract which may be composite in form in any case and if the transaction in truth represents two distinct and separate contracts and is discernible as such, in that case it has become permissible to separate agreement to sale from the agreement to render service. 4.3 Further, the Larger Bench of this Hon'ble Tribunal in Commissioner of Central Excise, Raipur v. BSBK Pvt. Ltd. (Supra), has held that where the value of goods is determinable in a turnkey or composite contract, the same must be removed to identify the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no dispute that the appellant has discharged the VAT/CST/ Sales Tax liability on the sale value of the goods supplied to its customers and thus the same cannot be subjected to the service tax again. In this regard the Hon ble Supreme Court in the case of Imagic Creative Pvt. Ltd. v. Commissioner of Commercial Taxes (Supra), the Hon'ble Supreme Court has categorically held that payments of VAT and service tax are mutually exclusive. Further, it was observed that even in case of indivisible contracts, it would be difficult to hold that the entire contract value be subjected to service tax or VAT. 4.10 Similarly in the case of Commissioner of Service Tax-V, Mumbai v. UFO Moviez India Ltd. (Supra), the Hon'ble Supreme Court has held that where a person has regularly paid sales tax on a particular transaction, there is no question of levying service tax on the same transaction. 4.11 In an identical case The Hon'ble Bombay High Court, in Nayana Premji Savla v. Union of India (Supra), has also held that VAT and service tax are mutually exclusive and that the same transaction cannot be subjected to both levies simultaneously. 4.12 In the present case undisputedly there is a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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