Separate supply and erection contracts excluded plant and machinery value from service tax pre-deposit; stay granted in a pre-07.07.2009 works contract.

Separate supply and erection contracts were treated as prima facie distinct, and the value of plant and machinery supplied under the supply contract was not required to be added to the service tax base for erection, installation and commissioning services at the pre-deposit stage. The contract had commenced before 07.07.2009, and the amended composition scheme proviso excluded its application where execution or payment had already begun on or before that date. On that basis, waiver of pre-deposit was found justified and recovery of the demanded amount was stayed until disposal of the appeal.

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Issues: Whether the value of plant and machinery supplied under a separate contract could be included for discharge of service tax on erection, installation and commissioning services, and whether waiver of pre-deposit was warranted for a works contract entered into before 07.07.2009.

Analysis: The contract was entered into and work had commenced before 07.07.2009. The relevant composition scheme rule, as amended with effect from that date, contained a proviso that excluded its application where execution under the contract had commenced or payment had been made on or before 07.07.2009. The record also showed two separate agreements, one for supply of plant and machinery and another for erection, installation and commissioning, and the appellant had already discharged service tax on the erection and commissioning contract value. On this prima facie view, the value of plant and machinery supplied under the separate supply contract was not required to be included for the purpose of pre-deposit at this stage.

Conclusion: Waiver of pre-deposit was justified and recovery of the demanded amount was stayed till disposal of the appeal.

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