TaxTMI 
TaxTMI 
2014 (7) TMI 1020
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....acts by M/s. Power Grid Corporation of India Ltd. The first contract called the Supply Contract was for the supply of all equipment and materials required for the Tower Package A2 for Mewad-Wardha part of 765 KV.S/C Seoni-Wardha-Akola-Aurangabad Transmission System as detailed in the Contract Document. The second contract termed as Service Contract was for providing all the services including detailed survey, tower optimization foundations inland transportation for delivery at site unloading, storage, handling at site, insurance, erection/installation, stringing, testing, commissioning including performance testing in respect of all the equipment supplied under the first contract for complete execution of Tower Package A2 for Mewad-Wardha part of 765 KV.S/C Seoni-Wardha Transmission Line. The appellant, as far as the first contract is concerned, paid excise duty and discharged the Sales Tax/VAT liability on the supply of goods. However, this contract is not the subject matter of dispute in the present case. The dispute is regarding the second contract which is called Service Contract. The period of dispute is April 2008 to March 2012. The Works Contract service under Section 65 (10....
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....16236 Dt. 03.10.2012 Order-in-Original 04/ST/2010/C Dt. 30.3.2010 20/ST/2010-11/C Dt. 14.03.2011 24/ST/2012/C Dt. 30.04.2012 49/ST/2012/C Dt. 31.08.2012 14/ST/2013/C Dt. 05.06.3013 Demand of Service tax Rs. 5,94,63,696/- Rs. 4,76,68,779/- Rs. 6,53,28,074/- Rs. 7,18,43,193/- Rs. 4,22,93,733/- Interest Not quantified. Not quantified. Not quantified. Not quantified. Not quantified. Penalties imposed Rs. 5,94,63,696/- under Section 78 and also penalties under Section 76 & 77 (2) of the Finance Act, 1994. Rs. 4,76,68,779/- under Section 78 and also penalties under Section 76 & 77 (2) of the Finance Act, 1994. Rs. 6,53,28,074/- under Section 78 and also penalties under Section 76 & 77 (2) of the Finance Act, 1994. Rs. 7,18,43,193/- under Section 78 and also penalties under Section 76 & 77 (2) of the Finance Act, 1994. Rs. 4,22,93,733/- under Section 78 and also penalties under Section 76 & 77 (2) of the Finance Act, 1994. It is noted that in all 5 adjudication orders, the Commissioners have given the same reasoning to arrive at their findings. The cases were adjudicated, duties of service tax confirmed as mentione....
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....16/2007-TRU dated 22.5.2007, wherein it was clarified that contracts which are treated as works contract for the purpose of levy of VAT/Sales Tax shall also be treated as works contract for the purpose of levy of service tax. They argued that the requirement for a Contract to fall under category of Works Contract under Section 65 (105) (zzzza), namely that the transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, has been met by the appellants. They produced documents evidencing payment of Sales Tax/VAT on the goods used in the service contract. 4. Revenue's stand is briefly stated in the first paragraph also. It is further seen that in the adjudication orders passed by Commissioner, it has been held that the Composition Scheme is applicable only to Works contract involving sale of goods as well as the provision of services and an entirely distinct obligation is created in such composition contracts, that there must be transfer of property in goods involved in the execution of Works contract. According to the Consultant, under Section 67 (1)(i), service tax is to be levied on the gross amount charged by the service prov....
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....into two contracts with Power Grid Corporation of India Ltd. The first contract, termed as Supply Contract, is for supply of goods namely Transmission Towers and their parts. There is no dispute on this contract. The second contract, called the Service contract, is for complete execution of Tower Package A2 for Mewad-Wardha part of 765 KV, S/C Seoni-Wardha Transmission Line. It is this service contract which under consideration. The main issue to be decided is whether the service provided under this contract should be classified under Works Contract service as defined in Section 65(105) (zzzza) of the Finance Act, 1994 or under "erection, commissioning or installation service as defined in Section 65(105) (zzd) read with Section 65 (39a) of the Finance Act. The second issue to be decided is whether the appellants are eligible to pay tax under the Works Contract (Composition Scheme for Payment of Service Tax) Rules 2007. 6. Let us see the relevant portions of the Finance Act 1994. As per explanation under Section 65(105)(zzzza), "works contract" means a contract wherein- (i) transfer of property in goods involved in the execution of such contract is levia....
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....sp; (f) Such other similar services; 7. Having seen the definitions of 'Works Contract' and 'Erection, Commission and Installation' Services, we proceed to analyze the facts with reference to statutory provisions. Service tax is levied under Section 66 of the Finance Act. The condition [clause (i) under explanation to Section 65 (105) (zzzza)] to be fulfilled for classifying a service under Works contract is that the transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods. Therefore, firstly, there must transfer of property in goods involved and secondly such transfer of property is leviable to tax as sale of goods. 7.1 Let us take the first aspect i.e. transfer of property in goods. The appellants' contention appears to be that merely because they have entered into a separate contract for supply of transmission towers (goods or materials) it cannot be concluded that the Service contract cannot be termed as a Works contract on its own footing. We note that there is no denying the fact that in the said Service contract, substantial amount of material has been used which is Cement, Steel, Bolts, ....
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....f the Service contract. Copies of VAT returns have also been placed on record. Therefore, the second aspect that goods in the Service Contract are leviable to tax as sale of goods, is also fulfilled. 7.4 The appellants have relied upon CBEC Circular B1/16/2007-TRU dt. 22.5.2007 which states that: "9.8 Presently, erection, commissioning or installation service [section 65(105)(zzd)], commercial or industrial construction service [section 65(105)(zzq)] and construction of complex service [section 65(105)(zzzh)] are separate taxable services. 9.9 Various trade and industry associations have raised apprehension in respect of classification of a contract either under the newly introduced works contract service or under erection, commissioning or installation and commercial or residential construction services. 9.10 Contracts which are treated as works contract for the purpose of levy of VAT / sales tax shall also be treated as works contract for the purpose of levy of service tax. This is clear from the definition under section 65(105)(zzzza). ......Emphasis supplied In this case the goods involved as part of Ser....
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....ust not have taken Cenvat Credit on the inputs. (iii) The provider of the service must exercise such option to avail the Composition Scheme. Out of the above conditions, the first has already been held by us to have been fulfilled. The appellant also opted for the Composition Scheme. Lastly, there is no allegation that they have taken Cenvat Credit on the inputs. Therefore there is no reason to deny the option of Composition Scheme to the appellants. 8.2 It is pertinent to note here that the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 were amended by Notification No. 23/2009-ST dt. 7.7.2009, whereby the earlier Explanation in Sub-rule (1) was substituted by the following Explanation: "Explanation.-For the purposes of this sub-rule, gross amount charged for the works contract shall be the sum,- (a) including- (i) the value of all goods used in or in relation to the execution of the works contract, whether supplied under any other contract for a consideration or otherwise; and ......... Provided that nothing contained....