Distinct supply contracts cannot be merged into works contract value; extended limitation and penalties also fail without suppression.

A single appeal by the corporate headquarters was treated as maintainable where common adjudication covered multiple registered units of the same legal entity with centrally maintained accounts. Separate contracts for equipment supply, separately invoiced and subjected to VAT/CST, could not be merged into the value of works contract service merely because the arrangement was EPC/turnkey or contained a cross-fall breach clause; the distinct supply contract was excluded from taxable value. Extended limitation was unavailable because the dispute concerned contractual interpretation and there was no proven suppression, wilful misstatement, or intent to evade tax, so the related penalties also failed.

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Issues: (i) Whether a single appeal filed by the corporate headquarters was maintainable against separate demands confirmed on multiple registered units; (ii) whether the value of equipment supplied under separate contracts could be included in the value of works contract service on the footing that the EPC/turnkey arrangement was a single composite contract; (iii) whether the extended period of limitation and penalties under the Finance Act, 1994 were sustainable.

Issue (i): Whether a single appeal filed by the corporate headquarters was maintainable against separate demands confirmed on multiple registered units.

Analysis: The appeal related to a common adjudication order confirming liabilities arising from multiple registrations of the same company. The accounts were centrally maintained and consolidated at the headquarters, and the liability, if any, ultimately rested on the same legal entity. On that basis, a single appeal by the headquarters was treated as sufficient for all connected registrations.

Conclusion: The preliminary objection to maintainability was rejected and the appeal was held maintainable.

Issue (ii): Whether the value of equipment supplied under separate contracts could be included in the value of works contract service on the footing that the EPC/turnkey arrangement was a single composite contract.

Analysis: The contracts for supply of equipment were separately structured, separately invoiced, and subject to VAT/CST. The service contracts for erection, installation and commissioning, civil work, and transportation/insurance were treated separately by the parties. A cross-fall breach clause was held not to be determinative of tax character by itself. Applying the principle that the intention of the parties and the legal character of the agreements govern taxability, the equipment-supply contract could not be merged into the works contract valuation. The value of goods sold under a distinct supply contract was therefore not includible in the taxable value of works contract service.

Conclusion: The inclusion of the value of supplied equipment in the works contract demand was not sustainable and was set aside.

Issue (iii): Whether the extended period of limitation and penalties under the Finance Act, 1994 were sustainable.

Analysis: The demand for the earlier period was founded on the extended limitation provision, which requires fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade tax. On the facts found, the dispute turned on interpretation of the contracts and the assessee had disclosed its transactions through returns and records. In the absence of the necessary ingredients for extended limitation, the demand for the time-barred period could not be sustained. Once the demand itself failed, the penalties under Sections 77, 78, and 78A also could not survive.

Conclusion: The extended period was not available and all penalties were unsustainable.

Final Conclusion: The impugned demand, interest, and penalties were held unsustainable, the appeals succeeded, and consequential relief followed as per law.

Ratio Decidendi: Where parties have entered into distinct supply and service contracts and the goods portion has suffered VAT/CST, the value of the supply contract cannot be merged into the taxable value of works contract service merely because the agreements contain a cross-fall breach clause; extended limitation also requires clear proof of suppression or other culpable conduct with intent to evade tax.

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