TaxTMI 
TaxTMI 
2016 (12) TMI 1071
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....etition, on 03.11.2016, had, after a detailed discussion, granted time to the respondents counsel to take instructions in the matter, and, advance arguments on the next date of hearing. 4. Briefly, the case set up by the petitioner is that it is in the business of design, engineering and supply of equipment for cement industry, as also in the business of design, engineering and supply of erection of mineral handling systems for mining, power and steel industries. 4.1. It is submitted that while entering into such like contracts with its customers, often material is supplied, which is, used in the execution of the works contract. 4.2. The petitioner's case, is that, often goods used in the execution of the works contract are delivered directly to the site of the customer, and, since, the sale is an inter-state sale, E-1 declarations are submitted to it by the concerned vendor. 4.3. The petitioner submits that insofar as its customers are concerned, commercial invoices are raised, wherein, the sale price of the goods delivered and used in the works contract is reflected. 4.4. It is, thus, stated that sales effected in respect of the goods supplied and used in the works contr....
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....lso specifically addressed the allegations in the Show Cause Notice to the effect that there is a huge margin in respect of transit sales. In fact, the petitioner established that the margins assumed are erroneous and in any case, the authority cannot sit on judgment over a commercially negotiated sale price of goods and adopt the purchase value of the goods for the purpose of identifying a higher quantum of value of service for the purpose of levy of service tax, ignoring the transacted price. ...." 6. The Adjudicating Authority/respondent No.1, as it appears, disregarded the contentions raised by the petitioner, and consequently, came to the conclusion, which, in sum, is that the contracts executed by the petitioner were comprehensive works contract for design, engineering, supply, erection, commissioning and installation on Lump Sum Turn Key basis, which were artificially split up into separate components such as contract for supply of equipments, and, for erection and commissioning, as also for execution of civil and structural works. 6.1. Furthermore, the Adjudicating Authority/respondent No.1 recorded that the value of supply of goods had been inflated, so as to reduce the....
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....ence of the contract or the reality of the transaction as a whole has to be taken into consideration. The pre-dominant object of the contract, the circumstances of the case and the custom of the trade provides a guide in deciding whether transaction is a "sale" or a "works contract". Essentially, the question is of interpretation of the "contract". In aforesaid case, Supreme Court has held that 'custom of trade' and 'substance over form' are important. 42. On the applying the ratio followed by the Hon'ble Apex Court in the above case to the case in hand, I find that the work undertaken by the noticee unit is without any dispute, involved both supply of equipments and provision of service thereon like erection, testing, commissioning, installation etc. using such goods supplied to the contractee. The custom of the trade in respect of Lump Sum Turn Key (EPC) projects is to treat the entire activity of supply of equipments and installation and erection and commissioning of such equipments as a singular inseparable activity and the substance of the contract awarded is erection and commissioning of the plant as a whole and is not merely restrict to supply of equi....
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....plant as a whole, are to be classified as 'Works Contract Service' in terms of Section 65(105)(zzzza) of the Finance Act, 1994 and as a service under Section 65B(44) of the Finance Act, 1994 read with Section 66E(h) ibid. and accordingly, I hold that the noticee have artificially vivisected such composite works to classify the service portion alone as 'Erection, Commissioning or Installation Services' which is not in line with the relevant statutory provisions." 7. Furthermore, the Adjudicating Authority/respondent No.1, based on the reasoning contained in the impugned order, went on to confirm the demand raised in the sum of Rs. 155,10,33,144/-. 7.1. In addition, payment qua interest at the appropriate rates on the service tax amount was also confirmed. 7.2. This apart, penalty in the sum of Rs. 10,000/- under Section 77(2) of the Finance Act, 1994, (in short '1994 Act') was also imposed on the petitioner. 7.3. Furthermore, penalty in the sum of Rs. 126,65,32,838/- was imposed under Section 78 read with 78B of the 1994 Act. 7.4. The only concession, if one may call it a concession, which was given to the petitioner, was that, the penalty would get red....