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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 ..... heme which is appropriated by Ld. Commissioner in the impugned order in original dated 30.03.2016. The respondents have also not challenged or disputed the said payment of Rs.91,74,594/- paid by them under VCES-2013. Therefore, under these two appeals the remaining amounts are only under dispute i.e. Rs.91,50,794/- under show cause notice dated 01.10.2014 and Rs.80,57,990 under show cause notice dated 28.03.2015. 1.1 The brief facts leading to the present dispute is that the Respondents are engaged in providing works contract services in the nature of supply of electrical goods like transformers, DG sets and other equipment and also commissioning and installation of such goods. The Respondents were also engaged in civil work in the nature of erection or creation of foundation for such goods supplied by them. On perusal of the show cause 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 va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of foundation was identifiable distinct and separate works. The service recipient could have very well awarded the works of erection and commissioning to one party and construction of foundation to other one. It was in fact not division of one contract in two parts instead the service recipient had given to the Noticee two contracts in one document. Judgement of Hon‟ble Apex court delivered in the case of State of Madras Vs. Gannon Dunkerley& Co. (Madras) Ltd. 1958 19 STC 353 (SC) squarely applicable to circumstances of this case varying the apex court has held that "to avoid misconception it must be stated that the above conclusion has a reference to works contract, which are entire and indivisible, as the contracts of the respondents have been held by the learned judges of the court below to be. The several forms which such kinds of contracts can 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, thou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilar issue was considered by the division bench of this Tribunal in the matter of Laxmi Engineering P Ltd. Vs. CST Ahmedabad reported in 2023 (4) TMI 348 - CESTAT Ahmedabad wherein one of the issue decided was as under: 5.1 As per the facts prevailing on records and argued by both the sides there is no dispute that there is also contract for supply of goods/Sale of goods and contract for services namely erection, installation and commissioning. Appellant have not paid service tax on supply portion on which they have paid VAT/CST. We have also gone through the statement of Shri Dipak Bhailalbhai Patel, Manager (Finance and Accounts) of appellant's company, against the question No. 3 he stated as under: Q3. It seems that your contract are composite contracts which includes goods and material as well as erection commissioning and installation of these goods and materials. 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ands paid on the material it has to be held that the goods were sold by the assessee. In such a scenario, the value of the same, cannot be added in the value of taxable service. Reference in this regards is made to the following decisions :- WIPRO G.E. MEDICAL SYSTEMS PVT. LTD. V. CST, BANGALORE - 2009 (14) S.T.R. 43 (TRI.-BANG.) DISPALLA HOTELS LTD. V. CCE, VISAKHAPATNAM - 2010 (18) S.T.R. 75 (TRI.-BANG.) LSG SKY CHEFS (INDIA) PVT. LTD. V. CST, BANGALORE - 2010 (18) S.T.R. 37 (TRI.-BANG.) IMAGIC CREATIVE PVT. LTD. V. CCT - 2008 (9) S.T.R. 337 (S.C.) DELUX COLOUR LAB PVT. LTD. V. CCE, JAIPUR - 2009 (13) S.T.R. 605 (TRI.-DEL.) PLA TYRE WORKS V. CST, TRICHY - 2009 (14) S.T.R. 32 (TRI.- CHENNAI). 5.6 In several decisions it has been held that service tax cannot be levied on that portion of the value representing the sale of the goods on which sales tax has been charged. This position 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been advanced by Ms.PinkyAnand, learned Additional Solicitor General that there is no evidence forthcoming from the side of the assessee that the value of the goods or the parts used in the contract and sold to the customer amounts to seventy per cent (70%) of the value of the service rendered which is the taxable component under the State Act. The aforesaid argument overlooks certain basic features of the case, namely, the undisputed assessment of the assessee under the local Act; the case projected by the Department itself in the show cause notice; and thirdly the affidavit filed before this Court by one S. Subramanian, Commissioner of Central Excise, Salem. 12. No dispute has been raised with regard to the assessment of the appellant on its turnover under the local/State Act, insofar as payment of Value Added Tax on that component (70%) is concerned. A reading of the show cause notice dated 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable. 3.2 We also find that the similar issue arose in case of Ocean Interiors Ltd. Vs. CCE, Chennai South reported in 2019-VIL-677- CESTAT-CHE-ST wherein it is observed as under: 4. Heard both sides. 5. The foremost allegation put forward in the Show Cause Notice is that the appellants have only consumed materials in execution of completion and finishing works and that there is no transfer of property in goods. The second allegation is with regard to the method adopted by the assessee for determining the value for payment of Service Tax under Works Contract Service. 6. It has to be noted that the demand is made under Works Contract Service and therefore, the allegation of the Department that there is no transfer of property in goods and that there is merely consumption of materials while providing the finishing services cannot sustain. 7.1 The second issue is with regard to the method of calculation in arriving 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 work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing manner, namely :- . . . . (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 person liable to pay tax on the service portion involved in the execution of the works contract shall determine the service tax payable in the following manner, namely:- (A) in case of works contracts entered into for execution of original works, service tax shall be payable on forty per cent of the total amount charged for the works contract; (B) in case of works contract entered into for maintenance or repair 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been used and sold in execution of the contract. 8.2 The Tribunal in the case of M/s. Singh Sales and Services Vs. Commr. ofCus., C.Ex. & S.T., Allahabad reported in 2017 (52) S.T.R. 38 (Tri. - Allahabad) has held that value of goods/spare parts supplied and used for providing service are not includible in the taxable value. 8.3 In M/s. Sobha Developers Ltd. Vs. Commissioner of C.Ex. &S.Tax, Bangalore reported in 2010 (19) S.T.R. 75 (Tri. - Bang.) it was held that the material value sought to be included on the ground that goods are consumed in provision of service and not sold, cannot sustain. 9. After appreciating the facts and following the decisions cited above, we are of the considered opinion that the appellant has correctly discharged Service Tax on the service portion. The demands therefore cannot sustain. 10. The impugned order is set aside. 9. The above decision of this tribunal is affirmed by Hon'ble Supreme Court as reported in 2023 (10) CENTAX 209 (SC). 10. In view of the 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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