TaxTMI 
TaxTMI 
2010 (7) TMI 335
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....sion System as part of the augmentation of capacity of Gazuwaka HVDC back to back projects and invited bids for 1 x 500 MW HVDC back to back power station for execution on a turnkey basis. Approving the bid filed by M/s. ABB Sweden vide proposal No. OILFM0I03LVZ-CA, 15-5-2001 and 02LFM0076LVZ-CA dated 13-6-2002 PGCIL awarded the following contracts : ã Off-shore supply contract with ABS-Sweden for supply of equipment from abroad for turnkey execution of the project - Contract No. C-55301-S656-8/CA-II/976 ã On-shore supply contract with ABB-India i.e. the Appellant for supply of equipment for turnkey execution of the project - Contract No. C-55301-S656-8/CA-II/977 ã On-shore service contract with ABB - India i.e. the Appellant for erection and related civil works to be performed in India covering inter alia port clearances, inland transit insurance, handling and transportation to site; storage, preservation, testing and putting into satisfactory operation, including successful performance and guarantee tests which was also awarded to the Appellant. - Contract No. C-5530....
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....sand Five Hundred and Twenty One Only) deposited towards service tax and Rs. 6,97,445/- (Rupees Six Lakhs Ninety Seven Thousand Four Hundred and forty Five Only) deposited towards Education Cess against the service tax liability confirmed at (i) above. (iv) I impose penalty of Rs. 3,62,83,996/-(Rupees Three Crore Sixty Two Lakhs, Eighty Three Thousand Nine Hundred Ninety Six Only) under Section 78 of the Finance Act, 1994. (v) I also impose penalty Rs. 100/- (Rupees One Hundred only) per day on M/s. ABB for delay in payment of Service tax from the date of its payment had become due till the date of payment of the same." 6. Aggrieved by such an order, the appellants are in appeal. 7. On conclusion of the hearing on 24-3-2010, leave was granted to file written submissions to both sides. Both sides have filed written submissions which are taken on record. 8. Learned counsel Shri G. Shivadas appearing on behalf of the appellant submits that the contracts which were awarded to M/s. ABB Sweden were in fact single contract. It is his submission that in order to identify various elements of the total project, ascertaining project milestones and for billing con....
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....& Anr v. UOI & Ors as reported at [(2006) 3 SCC (1) = 2006 (2) S.T.R. 161] and submit that paragraph 47 of the said judgment will squarely cover the issue in favour of the assessee. It is also his submission that if refund is claimed from the sales tax authority, that in itself would not mean that the contract has not been treated by the appellant as a works contract as the refund may be due on the final assessment due to many other available benefits in the Sales Tax Act. He would also draw our attention to the CBEC Circular No. B1/16/2007-TRU dated 22-5-2007, to submit that the CBEC Circular clarifies that contracts which are treated as works contract for the purpose of VAT/Sales tax are to be treated as works contract for the purpose of levy of service tax. He would draw our attention to the definition of the works contract services as enshrined in Section 65(105)(zzzza) and submit that the taxable services as indicated in respect of works contract would clearly apply in all squares to the appellants case. He would submit that the true nature of the contract depending on the mode of payment of the amount has to be ascertained from the contacts entered by the two parties. 9.&ems....
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....ature of various types of contracts in the context of tax on sale of goods and submit that the following cases laws lay down a principle which can be applied to situations that arise in context other than tax laws. (1) Hindustan Shipyard v. State of AP [2009 (119) STC 533] It is his submission that the contracts i.e. three in numbers which were entered by the appellant in this case were though for the execution of common project, they have been consciously entered into by the appellant and other parties for separation of supplies and the services. It is his submission that in this case, the services rendered under the 'on-shore services contract' during the period 1-7-2003 - 31-12-2004, would get squarely attracted under the category of "erection, commissioning or installation of plant, machinery, equipment or structures". It is his submission that the coverage of services rendered under this project has to be first applied the test of getting covered under the "erection, commissioning or installation of plant" and then only it may go into some other services. It is his submission that the mere fact that a new entry relating to works contract was introduced from a la....
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....escapement of service tax was noticed. It is his submission that the value of the computation and the service tax payable is done in accordance with the existing valuation norms and the same was not debated upon before the adjudicating authority. It is his submission that the imposition of penalty and demand of interest is sustainable. 10. Learned counsel in rejoinder submits that levy of service tax has to be tested in light of Section 65(39a) in as much as the definition itself evidences that goods are involved in the execution of such service. It is the submission that the argument is erroneous since if Section 65 (39a) covered and still continues to cover contracts involving both material and labour then there was no need for the Parliament to introduce works contract service specifically from 1-6-2007. It is the submission that considering the very same submission regarding classification of works contract service the Hon'ble Tribunal has been continuously deciding that works contract is a new service taxable only w.e.f. 1-6-2007 in the following matters : * Diebold Systems Pvt. Ltd. v. Commissioner of Service Tax, Chennai - 200....
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....rks contract service under Section 65(105)(zzzza) w.e.f. 1-6-2007, and not earlier. It is the submission that contention raised that Section 65(39a) will cover all contracts including those involving transfer of property in goods in execution of works contract is erroneous and arbitrary. Any such interpretation will lead to conflict between the definition of Section 65(39a) and Section 65(105)(zzzza) and thus cannot be adopted. It is the submission that decision of the Tribunal in the case of BHEL reported in 2008 (10) S.T.R. 218 which has been relied upon by the Revenue is actually in support of the above contention and clearly lays down that works contract cannot be made liable to tax prior to 1-6-2007. It is the submission that the assertion that these contracts are separate contracts is unfounded in as much as in the present case the intention of the parties was clearly evident from the bidding stage as well as from the various contract clauses which provide for cross fall breach clause stating that all the three contracts will be treated as one and the whole project has to be executed on a turnkey basis. It is the submission that without prejudice to the other submissions ....
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....nd assigns) on the one part and M/s. ABB limited, India (hereinafter referred to as "ABB-India" or the "On-shore Contractor" or the "Contractor" which expression shall include its administrators, successors and permitted assigns) having its registered office at 22A, Shah Industries Estate, Off Veera Desai Road, Andheri West, Mumbai-4000053 on the other part. Whereas POWERGRID is desirous of setting up its East-South Interconnector-III Transmissions system as part of augmentation of capacity of Gazuwaka HVDC back-to-back project and invited bids, for IX 500 MW HVDC Back to Back Station (hereinafter called the "Project") for execution on a turnkey basis, and whereas M/s. ABB Utilities AB, Sweden (hereinafter referred to as ABB-Sweden) has participate din the above referred bidding vide its proposal No 01LFM0103LVZ-CA dated 15-5-2001 and 02LFM0076LVZ-CA dated 13-6-2002. Whereas ABB-Sweden has requested POWERGRID under the terms of its proposal to award in favour of it the Off-shore Contract for the supply of equipment/materials sourced in countries outside India and has further offered that ABB-India shall undertake the Scope of work defined in Article 3.0 to this Agreement under th....
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....under :- "The Scope of work under the On-shore Services Contract shall cover all the services including related civil works to be performed in India covering inter alia port handling & custom clearance (in case of supplies from Off-shore), inland transit insurance, handling and transportation to site, storage, preservation, erection, testing and putting into satisfactory operation including successful performance and guarantee test as defined in this Contract of all the equipment systems of the Project as more fully described in the Technical Specification, as defined in Article 2.1(d) above. However, in case of spares the Scope of Work is limited to port handling & custom clearance (in case of supplies from Off-Shore), inland transit insurance, handling and transportation to site. The On-Shore Services Contract will also cover the necessary expatriate supervision for the areas of activities to be performed under the On-Shore Services Contract. The services under this On-shore Services Contract, as indicated by ABB-Sweden, have been annexed at Annexure II. However any other service required in India for completion of the Scope of Work in terms of the Technical Specificat....
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....IER & ADDRESS : M/s. ABB LTD., 22A, Shah Industrial Estate, Off Veera Road, Andheri West, Mumbai 2. R.C. NO./YEAR : ABS/10/1/2683/02-03 3. NAME OF THE COMMERCIAL TAX OFFICE/RANGE : COMMERCIAL TAX OFFICER HYDERGUDA CIRCLE, ABIDS DIVISION, HYDERABAD. 4. TOTAL AMOUNT OF TAX DEDUCTED Rs. 34,46,010.00 Sir,   We POWER GRID CORPORATION OF INDIA LTD., do hereby certify that a sum of Rs. 34,46,010.00 (Rupees THIRTY FOUR LAKHS FORTY SIX THOSAND AND TEN ONLY) was deducted being payable by M/s. M/S. ABB LTD., towards works contract tax (calculated @4% on the total turnover) for erection of Substation along with associated works as per LOA valued Rs. 265,180,873.00 as per running bills during the year 2003-2004 for the period APRIL-2003 TO MARCH-2004 III pursuance of the contract/supply vido order No.- C-55301-S656-8/CA-in/978 Dt. 25-10-2002 which are given in the schedule hereto. The above amount deducted at source has been paid THROUGH Cheque into the credit of state Government under head of account as per details given in annexure by POWERGRID CORPORATION OF INDIA LTD.  ....
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.... construction of a new residential complex or a part thereof; or (d) completion and finishing services, repair, alteration, renovation or restoration of or similar services, in relation to (b) and (c); or (e) turnkey projects including engineering, procurement and construction or commissioning (EPC) projects" 17. It can be noticed from the above reproduced definition that turnkey projects including engineering and procurement and construction or commissioning projects were considered as works contract. From the combined reading of the three contracts entered by M/s. Power Grid Corporation for the purpose of execution of turnkey project, it can be noticed that these three agreements would satisfy the definition of works contract as envisaged under Section 65(105)(zzzza) of the Finance Act 1994. If that be so, the service tax liability if any will be on the appellants from 1-6-2007. It is also be to noticed that the CBEC vide Circular No. B1/16/2007-TRU dated 22-5-2007 has in paragraph 9.9 and 9.10 has clarified as under :- "Presently, erection, commissioning or installation service [Section 65(105)(zzd)....
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.... to service tax. (c) Whether, ratio of decisions relied on by CESTAT applies to the facts of the present case. 2. The facts leading to this case are as hereunder : The respondent -assessee is registered under the provisions of Finance Act 1994. The Department holding that the respondent-asses see is rendering services like, design development, design review, installation and commissioning and technology transfer for study and design of oil free compressor systems, brought the respondent - Company within the scope of "Consulting Engineer" service as per section 65(13) of the Finance Act. Accordingly, a show cause notice was issued on 10-10-2002 calling upon the respondent-assessee why a service tax of Rs. 23,58,008/-shall not be demanded from it apart from levying interest and penalty under different provisions of the Act. The respondent contended that they are not liable to pay the service tax as Section 65(13) of the Act is not applicable to the respondent-assessee. However, the contention of the assessee was rejected by the Deputy Commissioner of Central Excise (Service Tax Division), Bangalore. Being aggrieved by the same, the assessee filed an appeal before t....
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....mbined reading of the definition of Consulting engineer prior to 2006 and after 2006, it is clear to the Court that the service rendered by the Company had not been included under the definition of consulting engineer prior to 2006 as it stood under Section 65(13). As a matter of fact, this Court has decided the said point in CEA 12/2007 on 1st April 2010 stating that prior to the Amendment Act, 2006, the Companies were not included under the definition of consulting engineer. When we have taken such a view, considering the relevant assessment year in the present case we have to hold that the service rendered by the assessee - Company during relevant period cannot be brought under the category of consulting engineer. If the service rendered by the assessee cannot be considered as a consulting engineer, the question of calling upon the assessee to pay the service tax under the Finance Act, brought the assessee under the word consulting engineer does not arise at all. Therefore, the said point has to be answered against the revenue and in favour of the assessee. 9. So far as the execution of the works contract is concerned, the works contract is defined under section 65(105)(zz....