TaxTMI 
TaxTMI 
2020 (4) TMI 103
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.... penalties, under the relevant provisions of Finance Act, 1994, are also under challenge along with that on the differential tax sought to be recovered under section 73 of Finance Act, 1994. 2. There is no dispute that proceedings which were initiated are limited to the 'full maintenance contract' entered into by the appellant with various entities involving repair and servicing of 'earthmoving equipment' supplied by them and that the appellant had been discharging tax liability on the labour component in accordance with the taxable service, viz., '(zzg) means any service provided or be provided to any person, by any person in relation to management, maintenance or repair of any goods or equipments including maintenance, management or repair of immovable or movable properties etc. but excluding motor vehicles' in section 65 (105) of Finance Act, 1994. In the impugned orders, the adjudicating authority has enhanced the assessable value to include the cost of materials that were claimed to have been invoiced separately and the cost of consumables supplied by the recipient of the service.' in section 65 (105) of Finance Act, 1994. In the impugned orders, the adjudicatin....
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....usion of value of consumables supplied by the recipient of the service in the assessable value. This should naturally apply to similar proposals for the earlier periods that are now impugned before us. We, therefore, propose to restrict our findings on this issue to the bare minimum. 6. An aspect that was raised before the adjudicating authority and rejected, not by invalidation of the proposition but by distinguishing between liability to pay and actual discharge of obligation coupled with lack of evidence thereof, was the exclusion of the 'goods' component in the transaction with the recipients of the service owing to taxability as 'deemed sale' under List II of the Seventh Schedule in the Constitution of India. Implicit in the manner of rejection is the acknowledgement that the entirety of the transaction could well come within the ambit of Article 366(29A) of the Constitution of India; hence, we have framed the second issue to encompass this aspect and, particularly, in the light of judicial decisions to which our attention was drawn by Learned Counsel. The superfluity of mutual exclusivity, even if overlapping, in jurisdiction to levy tax on commodities was never required t....
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....it, the deadly virus of conflict. The legislative wisdom of calibrating the measure of levy, and crafted carefully to comply with constitutional compartmentalization that did not envisage concurrent jurisdiction, was thus distorted and it was left to recent judicial interpretation to restore order in the consequential chaos of tax disputes. We refer to the decision of the Hon'ble Supreme Court in Union of India v. Intercontinental Consultants and Technocrats Pvt Ltd [2018 (10) GSTL 401 (SC)] which not only restricted the taxability to the value of 'such service' but also distinguished the mutual exclusivity of the charging and valuation provisions in other laws for taxing of commodities with the inextricable control of one by the other in Finance Act, 1994. 9. In the present instance, it is not in doubt that goods have been transferred to the recipient of the service; it is the incorporation of the goods within the article that has been subject to the service, and the ramifications thereof, that is. In the context of judicially determined mutuality, the extent to which section 67 of Finance Act, 1994 can be stretched is the crux of resolution. The jurisdictional competence to en....
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....nforming to those enumerations without providing any reason to expand therefrom. Therefore, the transaction of 'works contract', with the concomitant exclusion of the 'goods' element from scope of taxation conferred by List I in the Seventh Schedule, cannot be denied existence in relation to other taxing entries in section 65 (105), and the successor definition of 'taxable service' in section 65B, of Finance Act, 1994. 11. The first matter of concern resolved by the Hon'ble Supreme Court in re Larsen & Toubro Ltd was the non-taxability of 'goods' element in any contract that was liable for taxation under section 65(105)(zzzza) of Finance Act, 1994 prior to its incorporation therein with effect from 1st June 2007 even though the activities enumerated therein did exist under other entries in section 65 (105) of Finance Act, 1994 from an earlier date. It was, therefore, held that the entries existing independently till then, and simultaneously thereafter, was limited to taxing of the service simpliciter. The foundation for this distinction is the exclusion of tax by the Union on 'deemed sale' in composite contracts and the legislated facility for vivisection of such composite contr....
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....that the levy of service tax can only be on works contracts, and the measure of tax can only be on that portion of works contracts which contain a service element which is to be derived from the gross amount charged for the works contract less the value of property in goods transferred in the execution of the works contract. This not having been done by the Finance Act, 1994, it is clear that any charge to tax under the five heads in Section 65(105) noticed above would only be of service contracts simpliciter and not composite indivisible works contracts. xxxx 17. We find that the assessees are correct in their submission that a works contract is a separate species of contract distinct from contracts for services simpliciter recognized by the world of commerce and law as such, and has to be taxed separately as such. In Gannon Dunkerley, 1959 SCR 379, this Court recognized works contracts as a separate species of contract as follows :- "To avoid misconception, it must be stated that the above conclusion has reference to works contracts, which are entire and indivisible, as the contracts of the respondents have been held by the learned Judges of the Court b....
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.... and then taxed. The finding that this has, in fact, been done by the Finance Act, 1994 Act is wholly incorrect as it ignores the second Gannon Dunkerley decision of this Court. Further, the finding that Section 67 of the Finance Act, which speaks of "gross amount charged", only speaks of the "gross amount charged" for service provided and not the gross amount of the works contract as a whole from which various deductions have to be made to arrive at the service element in the said contract. We find therefore that this judgment is wholly incorrect in its conclusion that the Finance Act, 1994 contains both the charge and machinery for levy and assessment of service tax on indivisible works contracts.' of the judgement throws sufficient light to guide us on the right path. 12. On behalf of the appellant, it is contended that the rendering of 'management, maintenance or repair service' were composite transactions. The disinclination of the adjudicating authority to exclude the 'goods' element merely because of failure to furnish evidence of discharge of VAT liability on those transactions in 'goods' discounts any challenge to the contention now made. Furthermore, as submitted by....
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....al supplied by the service recipient for determination of the gross value. xxxxx 16. In fact, the definition of "gross amount charged" given in Explanation (c) to Section 67 only provides for the modes of the payment or book adjustments by which the consideration can be discharged by the service recipient to the service provider. It does not expand the meaning of the term "gross amount charged" to enable the Department to ignore the contract value or the amount actually charged by the service provider to the service recipient for the service rendered. The fact that it is an inclusive definition and may not be exhaustive also does not lead to the conclusion that the contract value can be ignored and the value of free supply goods can be added over and above the contract value to arrive at the value of taxable services. The value of taxable services cannot be dependent on the value of goods supplied free of cost by the service recipient. The service recipient can use any quality of goods and the value of such goods can vary significantly. Such a value, has no bearing on the value of services provided by the service recipient. Thus, on first principle itself, a value....