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TMI Blog2025 (1) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... CENTRAL EXCISE, PUNE [ 2017 (1) TMI 1110 - SUPREME COURT ] wherein it is observed ' The invoices which the appellant assessee has also brought on record by way of illustration show the break up of the gross value received. There is again no contest to the same. Leaving aside the question that the case now projected, with regard to lack of proof of incurring of expenses on goods and materials which has been transferred to the recipient of the service provided, appears to be an afterthought, even on examination of the same on merits we have found it to be wholly unsustainable.' It can be seen from the preamble of the Notification that it exempts the services of commercial or industrial construction services and works contract services provided in relation to port or other port. It is well established principle of law that wherever the words used in relation to it expand the scope of the subject. It is undisputed that the Respondent assesee has carried out the installation of high mast lighting tower on Jetty No. 8 of the Kandla Port. Therefore, the same is covered within the scope of the above exemption notification - The Respondent assessee has arrived at the value of servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e notices mentioned above it transpires that the Respondents had received the work orders wherein machinery electrical goods and labour commissioning and installation charges indicated separately. The Respondents have paid service tax on full rate applicable to the services stand alone wherever the bifurcation between the value of material and value of services is possible. The Respondents have paid service tax on the 40% of the total value of the contract price where the bifurcation between the value of the goods and the value of the services is not possible. In this way, essentially the Respondents have not paid service tax on the value of the goods. It is undisputed fact that the on the value of the goods the Respondents have paid VAT/ Sales tax as the case may be applicable on such sale of goods. The small portion of demand of service tax also pertains to activity of installation of high mast tower for lighting purposes on Jetty No. 8 at Kandla Port where the Respondents have claimed exemption from payment of tax being services provided in port area. 1.2 We find that for the purposes of present appeals the findings arrived at by Ld. Commissioner are important and crucial which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an assume are set out in Hudson on building contracts at page 165. It is possible that the parties might enter into distinct and separate contracts one for the transfer of materials for money consideration and the other for payment of remuneration for services and for work done. In such a case, there are really 2 agreements, though there is a single instrument embodying them and the power of the state to separate the agreement to sale from the agreement to do work and the render services and to impose a tax thereon cannot be questioned and we will stand untouched by the present judgement. 17. Therefore, by following the ruling in the above cases I hold that the notice had in fact provided more than one service such as services of erection commissioning and installation and construction of foundations etc under one contract and thereby the works awarded to them where two contracts in one instrument and they were eligible for opting different benefits for different works. In one part of the contract the Noticee had indicated the rates of machineries and rates of labour charges separately and had paid VAT on the value of such machines by treating it as a sales of goods and filed VAT r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ials. Please specify regarding payment of service tax under works contract service and erection commissioning and installation service. Answer: - We are paying service on the gross amount received from the customers including value of goods and materials under the category of works contract service. I state that in some case we have availed works contract composition scheme and paid service tax @4.12% on the value and in other cases we have paid service tax @10.3% and taken cenvat credit of inputs. In respect of erection commissioning and installation service category the installation charges and supply of the goods are bi-furcated in the tender it self and according we are paying service tax only on installation charges and showing goods and materials as supply. 5.2 After appreciating the above facts and going through the contracts and documentary evidences in the form of invoices, Balance sheet and Profit and Loss account, VAT return and detailed work sheet showing bifurcation of supply of goods and service portion separately submitted by the Appellant before us, we find that the contracts entered into by the appellants with their customers also gave the break-up of value of serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition has been elaborately dealt with in the decision of the Shilpa Colour Lab v. CCE, Calicut reported in 2007 (5) S.T.R. 423 (T) supra. This view has been affirmed in many decisions. Once, the sales tax has been paid on the materials, then on the same, service tax also cannot be charged. At this stage, we also take note of the Board s Circular No. 96/7/2007-S.T., dated 23-8-2007 laying down that the value of spare parts sold by a service provider is not required to be taken into consideration if the same are subjected to levy of sales tax and VAT and there is clear evidence to show the sale of the same. Circular further goes on to say that the fact of payment of VAT/sales tax on a transaction value indicates that the said transaction is treated as sale of goods. Keeping in view the Board circular as also the precedent decisions of the Tribunal, we hold that the appellant are not liable to pay service tax on the value of supply of goods/ material. 3.1 We find that the issue is otherwise covered by the decision of Hon ble Supreme Court in case of Safety Retreading Co. (P) Ltd. Vs. CCE, Salem reported in 2017 (48) STR 97 (SC) wherein it is observed as under:- 10. The exigibility of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 24th January, 2008 would go to show that the entire thrust of the Department‟s case is the alleged liability of the appellant-assessee to pay service tax on the gross value. In the aforesaid show cause notice, the details of the value of the goods, raw materials, parts, etc. and the value of the services rendered have been mentioned and service tax has been sought to be levied at the prescribed rate of ten per cent (10%) on the differential amount. It is now stated before us that the aforesaid figures have been furnished by the assessee himself and, therefore, must be understood not to be authentic. This, indeed, is strange. No dispute has been raised with regard to the correctness of the said figures furnished by the assessee in the show cause notice issued to justify the stand now taken before this Court; at no point of time such a plea had been advanced. 13. Besides the above, the affidavit of the learned Commissioner, referred to above, proceeds on the basis that the appellant assessee is also liable to pay service tax on the remaining seventy per cent (70%) towards material costs in addition to the 30% of the retreading charges. This is clear from the following aver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rriving at the value of taxable service for payment of Service Tax under Works Contract Service. For better appreciation, the relevant provisions prior to 01.07.2012 are noticed as under : ―2A. Determination of value of services involved in the execution of a works contract: (1) Subject to the provisions of section 67, the value of taxable service in relation to services involved in the execution of a works contract (hereinafter referred to as works contract service), referred to in sub- clause (zzzza) of clause (105) of section 65 of the Act, shall be determined by the service provider in the following manner:- (i) Value of works contract service determined shall be equivalent to the gross amount charged for the works contract less the value of transfer of property in goods involved in the execution of the said works contract. Explanation.- For the purposes of this rule,- (a) gross amount charged for the works contract shall not include Value Added Tax (VAT) or sales tax, as the case may be, paid, if any, on transfer of property in goods involved in the execution of the said works contract; (b) value of works contract service shall include,- (i) labour charges for execution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir or reconditioning or restoration or servicing of any goods, service tax shall be payable on seventy percent of the total amount charged for the works contract; (C) in case of other works contracts, not covered under sub-clauses (A) and (B), including maintenance, repair, completion and finishing services such as glazing, plastering, floor and wall tiling, installation of electrical fittings of an immovable property , service tax shall be payable on sixty per cent. of the total amount charged for the works contract; 7.2 Perusal of these provisions, as shown above, would indicate that Rule 2A continues after 2012 also and the Composition Scheme has been replaced and inbuilt in the Rules itself in a different form whereby the service portion in Works Contract is specified at a percentage of gross value based on the nature of activities on which normal Service Tax rate applies instead of a lower composition rate on the gross value under the erstwhile composition scheme. Thus, the principle of valuation of taxable service under the amended provisions also remains the same. 7.3 The appellant has arrived at the value of service portion of Works Contract Service as per Rule 2A (i) where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above settled position of law we are of the considered view that Revenue Department wants to levy service tax on the value of goods supplied by the Respondents Assessee on which VAT stands discharged which is not permissible under the law. Therefore, the demand of service tax is not sustainable in the present case. 11. For the demand of service tax on the services provided in the Port area i.e. on Jetty No. 8 of the Kandla Port we are of the view that the said services are covered by Exemption Notification No. 25 of 2007-Service Tax dated 22.05.2007. For ease of reference, the Notification No. 25/2007-ST dated 22.05.2007 is reproduced below: Notification No. 25/2007 - Service Tax G.S.R. (E). In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts commercial or industrial construction service, referred to in sub-clause (zzq) of clause (105) of section 65 of the Finance Act, and services provided in relation to the execution of works contract, referred to in sub-clause (zzzza) o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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