9911796707
TMI Blog2025 (4) TMI 1538X X X X Extracts X X X X X X X X Extracts X X X X ..... emaining value of 15 percent, they were discharging service tax. The percentage of 85 percent was stated by the respondents to be in accordance with the contracts entered by them. Multiple Show Cause Notices were issued from time to time to the respondents during the impugned period. While remanding matter, this tribunal gave following direction to the Commissioner (Appeals) vide order No. A/11183/2014 dated 03.07.2014 through the following observations: "5...........As per Rule 2A (ii) of the Service Tax (Determination of Value Rules, 2006, the actual value of transfer of property in goods involved in execution of works contract Is not to be taken into consideration while discharging service Tax liability under the Works Contract is not to be taken into consideration while discharging Service Tax liability under the Works Contract Services. It is the claim of the appellant that VAT/ Sales Tax was paid on the actual material value of the material sold, as per audit account furnished to the adjudicating authority and on examination of the records, it seems to be so. However, this matter whether VAT/ Sales Tax has been paid on the actual paid on the actual materials sold to the ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty/tax on average value basis, an attempt has been made to ascertain the authenticity of the said certificate based on the figures available in the Financial Statements of M/s Trio, which is tabulated herein below:- S. No Financial Year Total Value of Supply & Installation Value of material transferred Percentage 1. 2007-2008 Financial statements not available 2. 2008-2009 20,86,50,393 16,44,49,639 78.82 3. 2009-2010 21,11,82,558 16,73,61,487 79.25 4. 2010-2011 27,79,43,253 21,55,29,003 77.54 5. 2011-2012 44,42,14,992 40,04,97,935 90.16 6. 2012-2013 66,88,89,118 54,09,72,250 80.88 7. 2013-2014 54,43,86,433 40,65,99,136 74.69 8. 2014-2015 54,43,86,433 34,27,44,825 70.00 9. 2015-2016 74,16,09,303 54,79,31,030 73.88 10. 2016-2017 Financial statements not available 3.1 The above tabulation clearly demonstrates that the value of materials involved in the supply portion of contract as arrived at by M/s Trio was far lesser than 85% except for the financial year 2011-12. Therefore, the adjudicating authority erred in accepting such certificate issued by the Cost Accountant, which is incorrect and improper. That even such average value h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s agitated before the Hon'ble Supreme Court, it concluded that if under the State Legislation 70% was taken as the cost of material and tax discharged on that, the balance 30% could be taken as service component. It is clear that when the decision was taken, neither in the Finance Act, 1994 or in notifications thereof, separate rates of deemed service component was provided for. However, since 2004, vide Notification No. 15/2004-ST and thereafter through various amended notifications as well as Service Tax Valuation Rules segregated components towards goods and services came to be provided and even the Composition Scheme under various provisions of Finance Act,1994 was introduced for the tax payer to avail. While, D.O.F 334/1/2007-TRU dated 28.02.2007, it was provided that value of the service provided can be either arrived at, on the basis of records maintained by the assessee or it was allowed to pay 2% on the total value of work contract as service tax with no CENVAT credit. In the instant case the department is aggrieved mainly because 85% as a value of material supplied has been derived from the State Act despite specific provision in Finance Act, 1944 as well as in various no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual value of transfer of property in goods involved in the execution of the works contract, then such value adopted for the purposes of payment of Value Added Tax or sales tax, as the case may be, shall be taken as the value of transfer of property in goods involved in the execution of the said works contract for determining the value of works contract service under clause (i). Similarly, Section 2A(ii)at the relevant time provided that "(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 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, not covered under sub-clause (A), including works contract entered into for,- (i) maintenance or repair or reconditioning or restoration or servicing of any goods; or (ii) maintenance or repair or completion and finishing services such as glazing or plastering or floor and wall tiling or installation of el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be proper and it was appropriate to take into account the notional percentage under state legislation and adopt the percentage as taken in the state legislation to be the portion of goods and to treat balance as service related portion even under Service tax. Point of emphasis is that in the dynamics of service tax at the relevant time, there was no prescribed percentage for service component in Finance Act, 1994. The choice only existed between gross value or actual value based on documentary evidence. In the matter of Johnson case (cited supra), while following decision of the Apex Court, the coordinate bench considered that the percentage of 85% under Tamil Nadu Value Added Tax legislation being goods portion and 15% balance being service tax portion was sufficient and proper. The decision however, did not throw light on the aspect, as to which particular percentage whether of State or Central legislation i.e. Finance Act, 1994 will prevail and whether primacy could be given to state legislation when the percentage of 85 + 33 i.e 118% exceeded 100% of value and which would have absurd consequences due to overlapping 18% for the tax payer and the reduction in percentage to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue should be determined as per the clause (ii), which also, like the Tamil Nadu VAT Act and Rules, lays down a proportion of the consideration for the indivisible works contracts on which service tax should be paid. Since the works in this case were not original works, it falls under category B of clause (ii) of this Rule and service tax should be paid on 70% of the value of the works contract. In other words, if the Revenue's argument is accepted, the appellant will have to pay service tax on 70% of the gross amount charged for the works contract and the appellant has already paid VAT on 70% of the gross amount charged as per the Tamil Nadu VAT Act. This will lead to an anomalous situation where the appellant has to pay VAT as well as service tax on 40% of the total value of the works contract. On identical situation the Supreme Court in Safety Retreading Co. (P) Ltd. (supra) held as follows: "10. The exigibility of the component of the gross turnover of the assessee to service tax in respect of which the assessee had paid taxes under the local Act whereunder it was registered as a Works Contractor, would no longer be in doubt in view of the clear provisions of Section 67 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Learned Member (Judicial). I am unable to agree with the arguments and conclusion made therein. 10. The present appeal has been filed by Revenue. The issue involved in the instance case is the determination of value of Services provided by the respondents. The respondents were discharging VAT/Sale Tax on certain amount claimed as value of goods sold in their invoices. In the invoices, the respondents were showing that 85% of the total price recovered by them as value of goods and the balance amount of 15% was apportioned to value of services. The matter had earlier reached Tribunal wherein the appellant had contended that the value showed in their invoices are actual values of the goods sold on which VAT/Sale Tax has been paid. The revenue at the material time had contended before the Tribunal that the value shown are not actual values. In para 2, 4, 5 of the tribunal order dated 03.07.2014 following has been observed: 2. Shri R. Nambirajan (Advocate) and Shri Jigar Shah (Advocate) appeared on behalf of the appellant. Shri R. Nambirajan argued that the appellant is engaged in providing the services under the categories of maintenance & repair service; erection, commissioning & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract including the value of the materials supplied for which separate value is not available in the contracts. It was also his case that certain clauses in contract clearly convey that contracted value cannot be vivisected into material portion and the service portion. 5. Heard both sides and perused the case records. As the issue involved in the present proceedings lies in narrow compass, therefore, after allowing the Stay Petition, appeal itself is taken up for disposal. The appellant, inter alia, is providing erection, commissioning & installation services on which Service Tax is paid on 15% of the total contracted value which as per the appellant is proper discharge of Service Tax and the remaining 85% of the contract value represent supply of materials on which VAT/ Sales Tax is paid. It is the case of the appellant that 85% of the Sales Tax value of materials is arrived at on actual basis and is not paid on any imaginary or hypothetical calculation. The adjudicating authority while deciding the issue, has not considered the submissions made by the appellant and has held that the contracted value has been artificially bifurcated into the material portion and the service por ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Scheme) Rules, 2007, (iii) Notification No. 12/2003-ST, dated 20.06.2003. 12. The impugned order recognizes that deduction of the actual value of goods can be allowed in terms of Rule 2A of Service Tax (Determination of Value) Rules, 2006. It also highlight that both sides agree to that principle. The impugned order further observes as follows: "88. In the present case, no separate invoices have been issued by the assessee, for the transfer of property or sale of goods on which VAT has been paid. No details regarding separate amount for the value of goods and separate amounts for the value of service have been shown in the invoices. The assessee has themselves chosen to pay VAT on lumpsum 85% of the billing amount, which was not acceptable to the department and therefore, demands were raised against the assessee. Transfer of property involved in the execution of a works contract as specified under the said Valuation Rules, Works Contract Composition Rules or the aforesaid notifications, is not to be understood as normal sale of goods. Such transfer of property has been termed as "deemed sale" and made liable for payment of VAT/sales tax by way of specific Constitutional pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter examining the decision of Hon'ble Apex Court in the case of Larson & Toubro Ltd., -2005 (39) STR 913(S.C) impugned order holds as follows: "92. I hereby rely on the above judgment of the Hon'ble Supreme Court, above, wherein it has been held that in case of composite indivisible works contract, no element attributable to property in goods is transferred pursuant to such contract, enters into computation of Service Tax. 93. Further, from the above discussion, it is evident that statute stipulates that no Service tax can be recovered on the materials used in-the execution of the Contract on which VAT / Sales tax has been paid. CESTAT, vide its order No. A/11183/2014, dated 03/07/2014, in this matter, "As per Rule 2 A(ii) of the Service Tax (Determination of Value Rules, 2006, the actual value of transfer of property in goods involved in execution of works contract is not to be taken into consideration while discharging Service Tax liability under the Works Contract Services. It is the claim of the appellant that VAT/Sales Tax was paid on the actual material value of the material sold, as per audit account furnished to the adjudicating authority and on examination of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under: (1) All contracts for supply and erection of elevators, enetered into with its customers, by TRIO, have the following two disctinct elements for which separate pricing is provided in the contract itself: a. Supply b. Service (2) In each of the contract entered int by TRIO with its customer, it is clearly specified that for every Rs. 100/- worth of the contract Rs. 15/- shall be collected towards the service rendered for erectioning and commissioning of the elevators. The balance Rs. 85 /- are specifically charged towards the supply of materials. They have also verified the purchase costs for TRIO for purchasing such materials which are in turn supplied to the customer in relation to the respective contract. (3) On such Rs. 15/- specifically charged for rendering the service, TRIO collects and pays applicable service tax and duly discloses the value of such service rendered to the customer, in its Tax invoice, along with applicable Service Tax and Cess collected. (4) For the supply of material, TRIO specifically provides the value of the material so supplied in relation to the contract and collects and pays applicable VAT in relation to the same. The details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im of the C.A and the Cost Accountant. Therefore, I accept the above Certificates produced by the assessee. Further, from the records of the case, I also observe that the assessee has not availed Cenvat Credit on inputs and the same is also certified by the Chartered Accountant. In such a scenario, the methodology of bifurcation of the value of contract into service portion and material portion, adopted by the assessee is in consonance with the applicable law. Even though the assessee, has paid Service Tax under Notification 12/2003, dated 26.6.2003, when they ought to have paid the Service Tax under Rule 2 A(i) of the Service Tax Determination Rules, 2006, as amended, the entire exercise, is a revenue neutral situation, with no impact whatsoever to the Government exchequer, in as much as the assessee has appropriately paid Service Tax on the service portions of the Works Contract. The assessee has submitted sufficient proof to substantiate their claim that VAT has been paid on the materials consumed during the course of the execution of the Works Contract and that the supply portion of the contract amounts to 85% of the contract value. I, therefore hold that the demand of Service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used in the execution of the works contract; (vi) cost of establishment of the contractor relatable to supply of labour and services; (vii) other similar expenses relatable to supply of labour and services; and (viii) profit earned by the service provider relatable to supply of labour and services; (c) Where Value Added Tax or sales tax, as the case may be, has been paid on the actual value of transfer of property in goods involved in the execution of the works contract, then such value adopted for the purposes of payment of Value Added Tax or sales tax, as the case may be, shall be taken as the value of transfer of property in goods involved in the execution of the said works contract for determining the value of works contract service under clause (i).] It is seen that the Rule, 2A of Service Tax (Determination of Value) Rules, 2006, as it existed before 01.07.2012, mandated that the value of works contract shall be equivalent to the gross amount charged less the value of transfer of property in goods involved in the execution of said works contract. Clause C of the explanation of the said rule clearly indicates that VAT/Sale Tax if paid on "actual value of transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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, not covered under sub-clause (A), including works contract entered into for,- (i) maintenance or repair or reconditioning or restoration or servicing of any goods; or (ii) maintenance or repair or completion and finishing services such as glazing or plastering or floor and wall tiling or installation of electrical fittings of immovable property, Service tax shall be payable on seventy percent of the total amount charged for the works contracts.] Explanation 1.-For the purposes of this rule,- (a) "original works" means- (i) all new constructions; (ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al value of transfer of property in goods involved in the execution of Works Contract Service can be excluded from the total value of the contract. It is noticed that Commissioner in the impugned order in Para 90 has also held the same in following words: 90. The assessee in their written submission have themselves mentioned that as per Rule 2A(i) the assessee can pay service tax on the labour portion after reducing the actual value of goods transferred from the gross amount charged. Thus, it is apparent that there is a clear understanding on the part of the assessee that only actual value of goods is deductible to arrive at the taxable value of the service portion, which they have not done. From the above, it is apparent that both sides are in agreement that only the actual value of goods can be deducted from the total value of the contract. 18. The impugned order holds that the VAT/Sale Tax paid on the material supplied to their clients has discharged VAT/Sale Tax and therefore such value cannot be included in the assessable value. It has been argued by the revenue that the assesse was required to establish the veracity and legitimacy of the actual value involved in the good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "87. One of the main arguments raised by the said assessee, in this regard, is that they have already paid VAT or sales tax on the materials supplied to their clients and hence service cannot be demanded on the value of such materials. I reiterate that it is nobody's case that service tax would per se be leviable on the goods which are sold by an assessee on payment of appropriate VAT/Sales Tax. In fact, service tax statute contains abundant precaution to exclude the value of goods which are subjected to 'sale' or 'deemed sale' and payable to VAT or sales tax, from levy of service tax. In other words, if an assessee has effected 'sale' or 'deemed sale' of any goods or property during the course of provision of taxable services, he has to go through the legal provisions specified in the statute to exclude the value of such goods or property on which appropriate VAT or sales tax has been paid. (Accordingly, he has to opt for any of the routes as provided under rule 2A of the said Valuation Rules, Composition Rules or Notification No. 12/2003, as the case may be. However the assessee has to prove about the veracity and legitimacy of the actual value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same. 21. It has been asserted by revenue that the impugned order has wrongly invoked revenue neutrality. It has been argued that the concept of revenue neutrality can only be invoked only after the actual value of goods involved in transfer of property is ascertained. It has been argued that the Commissioner in the impugned order has blindly accepted the argument of revenue neutrality without examining the veracity of the claims made by the respondent. 22. It has also been argued by revenue that the Commissioner has not verified if any CENVAT Credit has been availed on the inputs involved in transfer of goods. The Commissioner has blindly relied on the CA certificate. It has been argued that merely because the respondent has filed ST-3 returns regularly and never defaulted on Service Tax cannot be a ground for holding that extended period is not invokable. 23. Rule 2A (ii) of Service Tax (Determination of Value) Rules, 2006 specifically mandates determination of actual value of goods. Explanaiton (b) to Rule 2A (i) of the said rules lists the costs that need to be included in the actual value of services. First proviso to Rule 2A, as amended mandates determination of value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 404, Shivam Complex, Bhuyangdev Cross Road, Sola road, Ahmedabad - 380061. 1. We have performed the procedures agreed with you and enumerated below with respect to certain components of the service tax returns filed under the Finance Act, 1994, read with the Service Tax Rules, 1994 i.e. Form ST-3 for the period of April, 2007, to March, 2017, and working of payment of service tax for the period April, 2017 to March, 2017 in case of Trio Elevators Co. (India) Limited ("Company") having service tax registration number AACCT4923EST001. 2. This report ("Report") is issued in accordance with the terms of request dated December 27, 2019, and further communications with the Company. 3. In connection with their statutory requirement regarding establishing the availment of CENVAT credit relating to service tax paid on input services only and not relating to excise duty paid on any inputs/capital goods, the Company has to obtain a report of an accountant computing the amount of CENVAT credit availed on the services, based on Service Tax Returns filed for the period of April, 2007, to March, 2017 and working of payment of service tax for the period April, 2017 to March, 2017. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007, to June, 2017, to check whether the CENVAT tax credit taken is relating to input services or not; 8. We have relied on appropriate representations from the management of the Company. 9. At your request, we have performed the above mentioned procedures and report our findings below: 9.1. With respect to figures mentioned in the Statement, we have checked the amounts mentioned thereunder to be in agreement with the results of our procedures carried out as mentioned in paragraph 7.1, 7.2 and 7.3; 10. Because the above procedures do not constitute either an audit or a review made in accordance with generally accepted auditing standards in India, we do not express any assurance on the individual components. 11. Had we performed additional procedures or had we performed an audit or review of the financial statements in accordance with generally accepted auditing standards in India, other matters might have come to our attention that would have been reported to you. 12. We have no responsibility to update this report for events and circumstances occurring after the date of this report. 13. The report is addressed to and provided to the Board of Directors of the Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficiency of the procedures for the purpose of report. There is no assertion regarding following of generally accepted accounting principles as required under the proviso to amended rule 2A of the Rules. (iv). In the para 10 the CA states as follows: "10. Because the above procedures do not constitute either an audit or a review made in accordance with generally accepted auditing standards in India, we do not express any assurance on the individual components." (v). The purpose of the report is related to CENVAT and not the ascertainment of value of goods sold para 11 as follows: "11. Had we performed additional procedures or had we performed an audit or review of the financial statements in accordance with generally accepted auditing standards in India, other matters might have come to our attention that would have been reported to you." It is apparent that the said report is not in respect of determination of actual value of goods sold. It merely examines the price charged in the invoices and does not take into account either the inclusion required to be made in value of goods in terms of Explanation (b) to Rule 2A of the Service Tax (Determination of Value) Rules, 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in-turn supplied to the customer in relation to the respective contract. 3. On such Rs. 15/- specifically charged for rendering the service, Trio collects and pays applicable service tax and duly discloses the value of such service rendered to the customer, in its Tax Invoice, along with applicable Service tax and Cess collected. 4. For the supply of material, Trio specifically provides the value of the material so supplied in relation to the contract and collects and pays applicable VAT in relation to the same. The details of the VAT collected along with the value on which it is collected is duly specified in the Tax Invoice which Trio issues to its customers. 5. Collection and payment of VAT and/or Service tax, is may be applicable, is on 'ACTUAL BASIS' and Trio has not availed of the benefit of abatement as provided under VAT law or under the Service tax law. 6. All amount of VAT collected by Trio from its customers, in relation to the materials supplied, is duly paid and deposited with the government exchequer, in accordance with the applicable laws. 7. All amount of Service tax collected by Trio from its customers, in relation to the service rendered, is du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hase) - - - 2406001/A (Purchase Mat. T @ 12.5%) 3,752,070 - 3,752,070 2400010/A (OCTROI EXP.[PURCHASE]) 330,663 - 330,663 2500099/11 (Octroi Expenses) 7,925 - 7,925 Cost of of Material 60,610,711 - 60,610,711 Salaries, Wages, Allowances, Bonus and Benefits (net) 2,612,923 - 2,612,923 PROVIDENT FUND 36,865 - 36,865 PROVIDENT FUND - - - GRATUITY - - - WORKMEN COMPEN INSURANCE - - - WORKMEN COMPEN INSURANCE - - - E.D.L.I - - - STAFF WELFARE - - - Direct Emploee Cost 2,649,788 - 2,649,788 Packing & Forwarding - - FREIGHT & FORWARDING 593,145 - 593,145 Octroi duty 338,588 - 338,588 Sales and Service Tax - - Power and fuel 33,181 - 33,181 Rent 625,644 - 625,644 Repairs to plant and machinery - - Repairs and maintenance - others 220,447 - 220,447 Expenses on contracts for installation/ service - 8,188,929 8,188,929 Insurance 7,359 - 7,359 Rates and taxes 16,343 - 16,343 Octroi duty - - - Travelling and conveyance 854,104 - 854,104 Office Supply - - - Printing and Stationery - - - Legal . and professional expenses 1,241,000 - 1,241,000 System and Soft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (viii) profit earned by the service provider relatable to supply of labour and services; (ii) ----------- After 01.07.2012, the Explanation (b) to Rule 2A(i) prescribes inclusion of following expenses: Explanation. For the purposes of this clause,- (A) value of works contract service shall include,- (i) labour charges for execution of the works; (ii) amount paid to a sub-contractor for labour and services; (iii) charges for planning, designing and architect's fees; (iv) charges for obtaining on hire or otherwise, machinery and tools used for the execution of the works contract; (v) cost of consumables such as water, electricity, fuel used in the execution of the works contract; (vi) cost of establishment of the contractor relatable to supply of labour and services; (vii) other similar expenses relatable to supply of labour and services; and (viii) profit earned by the service provider relatable to supply of labour and services; The rule mandates inclusion of labour charges of execution, charges for planning designing and architecture, charges for obtaining on hire or otherwise machinery and tools for execution, cost of consumer such as wat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cost of of Material 155,853,266.00 11,343,219.00 167,196,485.00 Employee (sic Exp.(NE) 14,788.00 - 14,788 Petrol Allowance (Ne) 95,068.00 - 95,068 Petrol Exp (Na) 608,055.00 - 608,055 Provident Fund Exp.(Ne) 296,688.00 - 296,688 Salary (Ne.) Exp. 2,848,999.00 - 2,848,999 Contractual Labour (Salary) Exp- Ne 6,466,013.00 - 6,466,013 Travelling (Fare) Exps -(Ne) 821,161.00 - 821,161 Travelling (Lodge & Boarding) Exps.(Ne) 437,823.00 - 437,823 Travelling (Others) Exp. (Ne) 770,146.00 - 770,146 Bonus (Ne) Exps 292,913.00 - 292,913 Direct Emploee Cost 12,651,654.00 - 12,651,654.00 Labour Charges Exps 18,750.00 18,750 Legal and Professional Expenses 2,123,125.00 - 2,123,125 Packing and Forwarding Charges 2,151,950.50 - 2,151,951 Transist Insurance Exp 9,521.00 - 9,521 Insurance (Transist) Exps 22,060.00 - 22,060 Insurance Exp.(Vehicle) - 17,677.00 17,677 Sales Promotion Exps. 1,500.00 - 1,500 Consulting Charges. 816,000.00 - 816,000 SME In terest Exps. 357,315.00 - 357,315 Interest Others 774,613.00 - 774,613 Trade Discount - (1,989,796.00) (1,989,796) LICENCE FEES EXP. 66,200.00 - 66,20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding following generally accepted accounting principles, the same cannot be accepted. I have examined two years data and found this deficiency therefore, I am not going into data for other years. 26. The order recorded by Learned Brother relied on the decision of co-ordinate Bench in the case of M/s. Infrastructure and Solution Pvt Ltd.- 2021 (11) TMI 695. The said decision in term relied on the decision of Hon'ble Apex Court in case of M/s. Safety Re-trading Company Ltd.- 2017 (1) TMI 1110 (S.C). It is noticed that in the said case the dispute related to the valuation for the purpose of Service Tax in cases involving re-trading of tyres. In the said case revenue was seeking to tax the entire value of re-trading cost recovered by the appellant. The appellant in the said case was seeking deduction of 70% as the value of the goods and parts used in the contract and sold to customer. It is noticed that in the said case there was no dispute regarding the actual value of goods sold by the appellant to the clients during re-trading of tyres. In the instant case it is noticed that the data relating to the actual value of goods involved in execution of the works contract is doubted and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.06.2023) Interim Order No. 12/2025 R. MURALIDHAR Vide interim order No. I/11/2023 dated 06.06.2023, the matter has been placed before me as a third Member for following difference of opinion:- "(i) If the appeal is to be allowed as held by the Hon'ble Member (Judicial) or the matter is to be remanded in view of observation made by the Member (Technical)." 2. The learned Counsel appearing on behalf respondent submits that the Respondent is engaged in Erection and Commissioning of Elevators which is in the nature of 'Works Contract Services' involved with both supply of goods and supply of services being involved. The assessee has been treating 85% of the contract as consideration received towards goods and has paid the VAT thereon. Treating in the balance 15% consideration as received towards service portion, they were paying the Service Tax on such consideration. Proceedings were initiated on the ground that the assessee was showing higher amount towards the value of goods without proper evidence because of which the Service Tax being paid was lower than what should have been paid by them. The Show Cause Notices were issued for the period April, 2007 to June,2017. The ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case law in case of Johnson Lifts Pvt ltd vs. CGST, Chennai- 2023 (9) TMI 79 CESTAT Chennai on identical issue. However, he fairly submits that this decision was rendered by Chennai Bench subsequent to the Interim Order passed by this bench which is before make for as a third Member reference bench. 7. On being queried as to whether there is a basis for the assessee to have adopted 85% for payment of VAT, the Learned Advocate draws my attention to the notification issued by the State Government on 11.10.2006. He draws my attention to Sr. No. 5 of this Notification wherein it is clearly shown that in respect of lifts and elevators, the percentage of abatement allowed on account of service portion is 15% only. He submits that in view of this specific notification issued by the the Government of Gujarat, the assessee was paying the VAT on 85% of the consideration and paying the Service Tax on the balance 15%. With respect of the Revenue's argument that as per the balance sheet figures, the value of the goods was approximately around 70 to 75 %, he submits the Revenue has derived this percentage based on the purchase value of the goods involved. If they had taken the value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied by the Adjudicating Authority. The adjudicating authority has gone through the documentary evidence placed before him including the Chartered Accountant's Certificate/Cost Accountant's certificate and has concluded that the assessee has paid the VAT on goods value portion. 13. I also find that the Government of Gujarat has issued the Notification No. (GHN-105) VAR-2006 (8) dated 11.10.2006, wherein in case of lifts and elevators 15% abatement is granted on account of service portion and the assessee is required to pay VAT on 85%. The relevant entry is reproduced below:- NOTIFICATION Finance Department, Sachivalaya, Gandhinagar Dated the 11th October, 2006. No.(GHN-105) VAR-2006(8) /Th- WHEREAS the Government of Gujarat is satisfied that circumstances exist which render it necessary to take immediate action to make rules and to dispense with preyipus publication thereof under the proviso to sub-section (4) of section 98 of the Gujarat Value Added Tax Act, 2003(Guj. 1 of 2005); NOW, THEREFORE, in exercise of the powers conferred by section 98 of the Gujarat Value Added Tax Act, 2003(Guj. 1 of 2005), the Government of Gujarat hereby makes the following rules further to am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repair of any building, road, bridge, dam, canal or other immovable property. Thirty percent. 2. Installation, fabrication, assembling, commissioning'or repair of any plant or machinery, whether or not affixed to any building, land or other immovable property. Fifteen percent. 3. Installation, fabrication, assembling, commissioning of any Air conditioner plant, Air conditioner, Air cooler, whether or not fixed to any building or other immovable property. Ten percent. 4. Assembling, fitting out, re- assembling, improving, producing, repairing or otherwise treating of furniture, fixtures, partitions, including __ contracts -of interior decoration. Twenty percent. 5. Installation, fabrication, commissioning or repair of lifts or elevators or escalators. Fifteen percent. 14. The same issue was before the Chennai in the case of Johnson Lifts Pvt Ltd - 2023 (9) TMI 79. The relevant is extracted below: - "1.2 It appears that during further verification, the appellant revealed that the payment of VAT for works contract was made as per the prevailing/respective State VAT law. States allowed standard deduction as 15% except the State of Andhra Pradesh wherein such standar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract of the value of the goods as per the provisions of Tamil Nadu Value Added Tax Act and Rules and paid service tax on 30% of the total contract value. The case of the Revenue is that since the appellant could not ascertain the actual value of goods transferred, it should have paid service tax under composition scheme. After calling for information from the appellant and examining the records, a show cause notice dated 21.12.2016 was issued to the appellant demanding differential service tax of Rs. 1,51,82,658/- as follows:- 4. The appellant paid VAT as per Section 5 of the Tamil Nadu VAT Act, read with Rule 8 (5) (d) of Tamil Nadu VAT Rules which prescribe that in case of works contracts 30% of the total amount charged would be treated as the service component and VAT shall be paid on the remaining 70%. The appellant discharged VAT accordingly and paid service tax on the 30% of the total amount reckoning it as the service component. The case of the Revenue is that service tax on works contract is chargeable on the consideration received for service portion of works contract if such consideration is available in the contract/invoice separately, otherwise service tax must b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le copy of the invoice is reproduced below:- 17. On going through sample invoice No. 119 of the appeal book (reproduced above), I find that the total consideration is divided at 85% towards sales on which VAT has been paid @ 12.5% and on the balance 15% erection charges (service) Service Tax @ 12.36% is being paid. Such invoice itself would be proof enough once the same is read along with the Notification issued by the State Government towards payment of VAT, to come to a conclusion that the assessee has not arbitrarily adopted 85 to 15% bifurcation in respect of their transactions. 18. Even for the prior period, if Notification 12/2003 is read carefully it says that "subject to the condition that there is documentary proof specifically indicating the value of the said goods and materials." There can be no better documentary proof than the invoice raised by the assessee. In the present case, it is clearly seen that the VAT is being paid on the 85% consideration treating the same as value of the goods. The Supreme Court's decision in the case of Safety Retreading Co. (P) Ltd case has already held that once VAT is paid on the value component as per the statutory provision of the St ..... X X X X Extracts X X X X X X X X Extracts X X X X
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