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TMI Blog2024 (6) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... ty on gross value of works contract i.e. Contract (2). Penalty - HELD THAT:- The proceedings against the appellant are not sustainable. As no proceedings are sustainable, no penalty is imposable on the appellant. The impugned demand set aside - appeal allowed. - MR. ASHOK JINDAL, MEMBER (JUDICIAL) AND MR. K. ANPAZHAKAN, MEMBER (TECHNICAL) Dr. Samir Chakraborty, Sr. Advocate and Shri Abhijit Biswas, Advocate for the Appellant Shri S. Mukhopadhyay, Authorized Representative for the Respondent ORDER The appellant challenges the demand of service tax and penalty confirmed against them 2. The facts of the case are that the appellant is a Government of India Undertaking, which entered into two separate agreements with the West Bengal Power Development Corporation Limited (WBPDCL) for supply of equipments and materials, which are as follows:- (i) for supply of equipments and materials of Main Plant Trunkey Package of Santaldih Thermal Power Project extension Units:6 (2X250 MW) (hereinafter referred to as Contract No. 1 ); (ii) for rendering services of erection, testing, trial run and commissioning of equipments and materials and components, which would constitute a power plant, service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Scheme. 2.5 Thereafter, on 13.06.2011, a show-cause notice was issued alleging that the appellant has paid short service tax by not including the value of free materials supplied under Contract No.2 for calculation of service tax liability under the composition scheme and alleged that the appellant has paid short service tax. The period of dispute is from 01.06.2007 to 30.11.2010. 2.6 Therefore, the proceedings were initiated against the appellant for demand of service tax and the appellant contested the same. 2.7 The adjudication took place and the demand of service tax was confirmed under Contract No.(1) in the taxable value and under Contract No.(2) for payment of service tax under the composition scheme. 2.8 Against the said order, the appellant is before us. 3. The ld. Sr. Counsel for the appellant, appeared before us and submits that there are two separate contracts entered by the appellant that the service recipient and the Contract No.(1) is for supply of equipment/goods, on which the proper tax has been paid by the appellant and some of the items were cleared as such by the appellant. In that circumstances, the value on Contract No.(1) cannot be included in the taxable va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost supplies of goods and services in or in relation to the execution of Works Contract [mentioned in the Explanation to Rule 3(1)(a)(i) and (ii)] in the gross amount for the purpose of payment of service tax on works contract under the composition scheme, is a legal requirement, only with effect from 7-7-2009 when the Explanation became a part of Rule 3(1). 3. The explanation appended to Rule 3(1) with effect from 7-7-2009, categorically says in the proviso that nothing contained in this Explanation shall apply to a works contract where the execution under the said contract has commenced or where any payment, except by way of credit or debit to any account, has been made in relation to the said contract on or before the 7th day of July, 2009. Where execution of works contract has commenced prior to 7-7- 2009 or where any payment (except payment through credit or debit) has been made towards a works contract prior to 7-7-2009, then in those cases gross amount for the purpose of payment of service tax does not include the value of free of cost supplies. 4. The above clarification may be communicated to the field formations and service tax assessees through Trade Notice/Public Notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 3(1) of Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. 10. The Hon ble Supreme Court in the case of UOI v. Mahindra and Mahindra Limited [1995 (76) E.L.T. 481 (S.C.)] in Para 5 has held as follows :- 5. The main thrust of the arguments of the learned Solicitor General before us was that the price for the sale of CKD packs by the foreign collaborator to the respondents is not the true price. In other words, the price fixed or mentioned in the invoices was not the sole consideration for the sale of CKD packs, for the various reasons stated by the Assistant Collector in his order. According to the learned Solicitor General, the price mentioned in the invoices was (or should have been) determined by taking into consideration the lumpsum of 15 million French Francs (nearly three crores of Rupees) paid by the respondents to the foreign collaborator under the agreement. It is on this basis Section 14(1)(a) was excluded and resort to Section 14(1)(b) of the Customs Act was sought to be justified by the revenue. In appreciating the above plea we have to bear in mind certain basic principles. The bargain between the respondents and the foreign collaborator is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he LOI issued by them, of which two are supply contracts and one is a contract for services which also included supply of some material. He also had an umbrella agreement combining these three agreements. It is not also in dispute that in addition to the supply, the appellant had discharged VAT/CST as the case may be in respect of the supply contracts. The only question remains to be answered is whether the value of this onshore and offshore supplies by the appellants need to be included in the value of services rendered by them under the works contract scheme. It is not in dispute that the material in question was supplied by the appellant with respect to this particular contract and after the supply was completed, the goods which were supplied were given by APPDCL back to appellant for execution of the contract. A plain reading of CBEC circular D.O.F. No. 334/13/2009-TRU, dated 06.07.2009 explains that such values became includible in the value of the works contract as per the amendment made vide notification NO. 23/2009-ST, dt. 07.07.2009. By inserting an explanation, it was also clarified by CBEC themselves that the inclusion of the values would not apply to such contracts wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmance guarantee tests on EPC basis for Balance of Plant (BOP) systems and equipment for 2 x 800 MW supercritical coal fired Thermal Power Plant, the contracts have to be considered as one. 8. In other words, the adjudicating authority held that the three contracts in question are essentially part of the same contract and they were signed on 12.08.2009, hence the explanation w.e.f. 07.07.2009 to Rule 3 of the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007 is not relevant. On a plain reading of the contracts in question, we do not find it so. There are indeed three different contracts and for which three different payments were to be made and were made. The umbrella agreement only combines all these three agreements so as to give a complete perspective of the scope of the contract. In fact, there is no payment whatsoever under the umbrella agreement. Further, the advances in respect of the three contracts were received prior to 07.07.2009 and hence the amended provisions do not apply. In view of the above, we find that the value of the material supplied under off-shore and on-shore contracts cannot be included in the value of the works contract service as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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