TaxTMI 
TaxTMI 
2006 (3) TMI 759
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....iled Engineering, Procurement, Supply, Construction, Erection, Installation, Testing Commissioning and Mechanical Guarantee of the said Units. The Lump Sum Price offered by the said assessee against the work of Turn Key Project for the said units of Digboi Refinery are as follows : Sr. No. Description Price Contract No. PROJ/SDU/DR/53 of PROJ/HDT/DR/54 of 1. Lump sum price for Residual Process Design and detailed Engineering ₹ 9,00,90,000 ₹ 8,31,60,000 2. Lump sum price for Supply portion ₹ 51,54,16,100 ₹ 54,64,00,000 3. Lump sum price for Construction installation portion ₹ 38,36,24,000 ₹ 35,21,04,000 The above lump sum prices offered by the said appellant have been accepted by M/s. Indian Oil Corporation Ltd. (Assam Oil Division), Digboi vide their letter Ref. No. SDU/CON/02 and HDT/CON/03 respectively dated 24-2-2000. 3. In the second case, the respondent M/s. Petrofac International Ltd., New Delhi was awarded the contract for Residual Process Design, Detailed Engineering, Procedurement, Supply, Construction, Fabrication, Erection, Installation, Testing Commissioning and mechanical Guarantee of sulphur block at Gujarat Refine....
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....upply. It was accordingly, submitted that when in a work contract the charges for the service have been separately and clearly mentioned it would cease to be an individual work contract and there shall be absolutely no dispute about the liability to service tax of the taxable services provided in course of execution of the work contract. In view of this the order of Commissioner (Appeals) was contrary to the facts of the case. 9. The learned S.D.R. invited attention to the details of the contract wherein the break up, the lump sum price for residual process design and detailed engineering was given separately as compared to lump sum price for supply portion and lump sum price for construction/installation portion. It was submitted that, it was only in respect of the lump sum price for residual process design and detailed engineering that contract itself indicates that the service tax is included in the lump sum price as distinct from the Daelim Industrial Co. Ltd.'s case (supra) where the service tax was indicated as per the prevailing rate and the amount was quantified and therefore, there was an element of uncertainty in respect of service tax and it is not known whether the ser....
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....d the other of sale of food stuff with a view to subject the latter to the sales tax. This judgment has become irrelevant after 46th amendment of the Constitution by which article 336(29A) of the Constitution of India was amended so as to enlarge the scope of entry 54 of List II of 7th Schedule of the Constitution - "tax on sale or purchase of goods, to include tax on transfer of property in goods (whether as goods or in some other form) involved in execution of a work contract". Therefore, the argument that the work contract cannot be vivisected and a part of it subject to tax is no longer valid. Moreover, Supreme Court in its judgment in the case of Associated Hotels India Ltd. (supra) relied upon by the Tribunal in its judgment in case of Daelim Industrial Co. Ltd. (supra) has upheld that an implied contract for supply of goods while executing a service contract can be inferred if there is evidence in this regard. 12. Reference was also invited to the decision of the Kerala High Court in the case of Kerala Colourlabs Association v. Union of India 2003 (TIOL) 19, wherein it was held that for levy of service tax, the taxing event is rendering of service. It was pleaded ....
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....9/11/2002-ST, dated 18-12-2002 wherein it has been clarified that a turnkey project for construction of flats, administrative building etc. involve a lot of preparatory work is required e.g. soil testing, survey, planning design, drawing etc. and once the design and drawing are completed by the construction company it always seeks the approval of the client before proceeding with the construction. If the client suggests some changes they are incorporated in the design. This portion of the work is provided to its client and the service is definitely of a 'consultancy engineer' and hence, taxable. It was accordingly, submitted that the instant case is fully covered by the Board's circular and therefore, the drawing and detailed engineering charges will be subject to service tax. M/s. Petrofac International Ltd. 15. In respect of above case, the learned S.D.R. submitted that the issue involved is the same and the facts are also similar and the arguments in the above case will fully apply to the instant case also. 16. In view of above, it was submitted that once the work contract relates to supply of services as well as to execution of work i.e., construction, service tax shall be p....
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....ice for supply portion and for construction and installation portion. A great emphasis has been laid on the fact that there was a separate demarcation of price for residual process design and detailed engineering including the fact that the price included the service tax payable. It was submitted that the price break up was only for the purpose of billing schedule or control of cash flow. There was no agreement between the parties for rendering the service of design and engineering for specific price as a stand alone activity. In case of respondent, there was no understanding for a separate services for design and engineering divorced from the main contract. Therefore, no amount of total lump sum price can be attributable as taxable service of a consulting engineer. The detailed engineering was carried out by Engineers India Ltd. as consulting engineer for I.O.C.L. and to a limited intent by another company by the respondents group of companies viz. L & T Chiyoda Ltd., Baroda and they had shown the services as consulting engineer in the service tax return filed by them and the service tax as applicable paid accordingly. The amount of service tax indicated in the contract was not th....
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....s not an aim for the passenger in itself but for better enjoyment of the main service of air transport. Whether it is necessary for the main supply is not a relevant question]. (iii) Card Protection Plan Ltd. v. Customs and Excise Commissioners [1999] STC 270 ECJ and Card Protection Plan Ltd. v. Customs and Excise Commissioners [2001] STC 174 HL [There was a single supply where one or more elements constituted the principal service and others were merely ancillary, in that they did not constitute for customers aims in themselves, but simply a means of better enjoying the principal service. What constitutes a single supply in economic sense should not artificially split.] (iv) Customs and Excise Commissioners v. British Telecommunications plc [1999] STC 758 [Deli-very charges shown separately in the invoice does not imply that BY was getting a supply of service of delivery apart from supply (sale) of cars. There was a single supply of purchase of a delivered car. Delivery was incidental to supply of the car. The fact that delivery could have been separately arranged from different party is not material. The court has to see what the arrangement was in the instant case.] (v) Pi....
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....Industrial Co. Ltd. (supra). 23. As regards 16th Constitutional amendment it was submitted that it defines "tax on sale or purchase of goods" an expression appearing in the Constitution in the context of levy of sales tax. This has no impact on laws other than laws on tax on sale or purchase of goods. The amendment has introduced the context of "deemed sales". It does not alter the meaning of sale in the Sale of Goods Act or other enactment, including the law on service tax. The Supreme Court has in the case of State of Maharashtra v. Laljit Rajshi Shah [2000] 2 SCC 699 held that legal fictions are created for some definite purpose and the fiction is to be limited to the purpose for which it was created and should not be extended beyond that legitimate field. Accordingly, it was submitted that legal fiction of deemed sale was introduced by the 46th Constitutional amendment for levy of sales tax and it has no application as regards interpretation of service tax provision. Further in any case the 46th Constitutional amendment has the result of dividing whole contract into sale of goods and supply of services as a whole. There is no method of further dissecting th....
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....aspect of works contract and decided on the basis that the entire activity of the assessee as it answers the description of taxable photography service. In the case of the respondents, the construction of a plant on turnkey basis is the service. Such service is not taxable at present. 27. In Rolls Royce Inds. Power (India) Ltd. v. CCE 2004 (171) E.L.T. 189, the Hon'ble CESTAT held that in a contract for operation and maintenance of power plant, the entire responsibility for generating and supplying power is with contractor. If there is any engineering issue arising during the discharge of the responsibility, it has to be sorted out and there is no service receiver for solving of engineering issues. Hence, no service tax is payable. In this judgment, the Hon'ble CESTAT rejected the SDR's contention about the 46th Constitutional Amendment and held that the Apex Court's decision in Builders' Association of India's case (supra) has no application as the deeming definition that exists in sales tax, is not there for the purpose of service tax. 28. In the last the learned advocate referred to the case of S. Krishana [1956] 7 STC 26 relating to drying of tobacco pointed out by the learne....
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....dustrial Co. (supra) has been dismissed by the Apex Court. Further the decision of the Daelim Industrial has been followed by this Tribunal in the case of L & T Ltd. (supra). Its ratio has also been referred to by the Gujarat High Court in the case of Elecon Engg. Co. Ltd. (supra). Further in Ircon International Ltd. (supra), Tribunal has held that construction contract could not be subjected to service tax as consulting engineering service, either as a whole or in part and further observed that position remains covered by the decision in the case of Daelim Industrial Co. Ltd. (supra). Revenue has not been able to distinguish the present contract from that involved in Daelim case because the contract in the present cases are essentially for construction and not for the services and the services referred to are an integral part of contract. The contract is a work contract on a turnkey basis and not a consultancy contract. It is well-settled by series of case laws that a work contract cannot be vivisected and part of it subjected to tax. The decision in the Associated Hotels case does not lend any support to the revenue as a solitary instance cited by the learned S.D.R. in the case o....