TaxTMI 
TaxTMI 
2021 (11) TMI 18
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....demand of service tax to the extent of Rs. 3,17,18,820/- (Rs. Three Crores Seventeen Lacs Eighteen Thousand Eight Hundred Twenty only) u/s 73 (2) of the Finance Act 1994 & order MRVC to pay the same in terms of the provisions of Sec 66A read with Sec 68 of the Finance Act 1994, I proceed to appropriate the service tax already paid by MRVC to the above extent. (c) I order for recovery of interest on the aforesaid service tax of Rs. 3,17,18,820/- (Rs. Three Crores Seventeen Lacs Eighteen Thousand Eight Hundred Twenty only) from MRVC u/s Sec 75 of the Finance Act 1994. (d) I drop the demand to the extent of Rs. 18,83,876/- (Rupees Eighteen Lacs Eighty Three Thousand Eight Hundred Seventy Six only) in respect of service tax payable on reverse charge basis under Sec 66A, in respect of services received/ payment made prior to 18-4-2006. (e) I refrain from imposing any penalty on MRVC u/s 76, 77 & 78 of the Finance Act, 1994. (f) This order is issued without prejudice to any other action that may be taken against MRVC under the Finance Act 1994 or under the provisions of any other Act for the time being in force in India. 2.1 Appellant (M/s Mumbai Ra....
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...., Navi Mumbai) shall be reimbursed by the purchaser, subject to production of documentary evidences wherever applicable. 2.4 Appellant vide their letter dated 20.09.2010 informed that i. They entered into a Contract with joint venture of Siemens AG, Germany & Siemens Ltd, Navi Mumbai. The responsibility of each of the joint venture partners was clearly defined & various stage of payment indicated. ii. Apart from the liability of Rs. 1.83 crores which they had already reported earlier, they also had fresh liability between April 2010 to July 2010 & after taking into account this liability the Total Service Tax liability works out as Rs. 3,35,27,764/- iii. In order not to breach the provisions of law they had decided to discharge their Service Tax liability & submitted Challans bearing nos 50041 dated 27.08.2010, 50006 dated 28.08.2010, 50007 dated 28.08.2010, 50067 dated 31.08.2010, 50081 dt 06.09.2010 evidencing payment of service tax of Rs. 3.35,27,764/- under reverse charge mechanism for "Erection, Commissioning or installation service. iv. While one of the contractor i.e., Siemens Ltd, Navi Mumbai had discharged the service lax liability, t....
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.... • International Metro Civil Contractors [2019 (20) G.S.T.L. 66 (T-Del.)] • Kumagai Skanska Hcc Itochou Group [2015 (12) TMI 1669 - CESTAT, NEW DELHI] • Hon'ble Karnataka High Court in the case of Turbotech Precision Engineering Pvt. Ltd 2010 (18) S.T.R. 545 (Kar.), held that the activities of Design development, design review, installation and commissioning and technology transfer undertaken are in the nature of work contract. This has been affirmed by Hon'ble Supreme Court reported in 2015 (39) S.T.R. 913 (S.C.). • The Commissioner has not disputed that contract' is composite in nature i.e. involving both supply of goods as well as services and thereby falls under works contract. However he has held that the definition of 'works contract service' excludes the contract in respect of railways and hence the said service would primarily mean i.e. in the first place on account of exclusion clause in the definition itself go out of the scope of the 'works contract services' i.e., only such turnkey projects or EPC contracts not pertaining to railways could be considered to fall under the definition of 'works contr....
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.... • Diebold Systems (P) Ltd, 2008 (9) S.T.R. 546 (T-Chennai) • The actual performance of the service of 'erection, commissioning or installation' of plant, machinery or equipment will be covered under the said category and in the present case actual work has been done by the staff of Indian railway and not be foreign service provider. In the present case actual work has been done by the staff of Indian railway and not be foreign service provider. The said fact has also been admitted by the Commissioner in his Order in para 69 & 72, wherein he has held that the commissioning, testing and trial of rakes in Mumbai has been done by the staff of Indian Railways and the Engineers of Foreign Service providers have merely done the supervision of the same. • In the case of M/s LNV Technologies Pvt Ltd 2019 (2) TMI 212 - CESTAT Chennai, it has been held that Supervision of erection and commissioning cannot be equated with civil work of erection and commissioning or installation of plant and machinery and when assessee has not done actual commissioning activity than service tax cannot be demanded. • Without prejudice to the above, it is f....
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....eable. • In this case, the Commissioner has dropped the penalty levied under Section 76, 77 and 78 of the Finance Act, 1994. Therefore, the appellant submits that once the penalty has been dropped extended period cannot be invoked. • Royal Travels 2011 (21) S.T.R. 31 (Tri. - Ahmd.) • Agarwal Trading Co. 2016 (44) S.T.R. 479 (Tri. -Del.) • Franke Faber India Ltd. 2017 (52) S.T.R. 155 (Tri. -Mumbai) • Mahesh Kumar Sharma 2017 (49) S.T.R. 239 (Tri. -Del.) • Appellant is a Government Undertaking and therefore, there is no malafide intention to evade duty and thus, extended period is not invokable. The appellant relies on following judgments - • Bharat Yantra Nigam Ltd. 2014 (36) S.T.R. 554 (Tri.-Del.) • Rajasthan Renewable Energy Corpn. Ltd. 2017 (51) S.T.R. 269 (Tri.-Del.) • Best Undertaking [2007 (213) E.L.T. 202 (Tri -Mumbai) • The demand for the period upto September 2009 is beyond the normal period and thus, demand amounting to Rs. 1,03,46,762/- is time barred. 3.2 Arguing for the revenue, learned authorized representative submits,- • Th....
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.... evident that the contract is divisible. • On the special condition of contract at para 8 installation of equipments and supervision are separately dealt with. Separate clauses for training incorporated in the contract. • In special condition of contract the taxes and duties are bifurcated which clearly elicit that this contract is divisible in nature for supply of goods as well as supply of services. o Invoices also mention that charges for installation & commissioning were made • • the money was paid in foreign currency and the bifurcation of prices for supply of goods and supply of services is separately mentioned. • In the OIO, the Learned AA has discussed threadbare vis a vis the SCN, facts on record and most importantly the clauses and the conditions of the contract (gen & special) which clearly state that • Para 8 (a) (iv) of the Special Conditions of Contract which pertains to Commissioning (Supervision) ibid (para 71)... • para 72 evinces that the consideration for commissioning, testing, service trials and supervision of commissioning, testing and service trials was underta....
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.... SAS Sculfort France. 4.3 As per the learned Chartered Accountant the issue is squarely covered in their favour by decision in the case of Delhi Metro Rail Corporation Ltd. 2018 TIOL 1556 - CESTAT DEL, tribunal has held as follows: '5. On perusal of the case records, we find that the contract awarded by the appellant is composite contract, involving both supply of material and for execution of the assigned job. Thus, as per the judgement of Hon'ble Supreme Court, in the case of Larsen & Toubro - 2015 (39) STR 913 (SC, such activities should be taxable under the category of works contract service. Since, such service was brought into the tax net w.e.f. 01.06.2007, the appellant cannot be taxed under any other category of service prior to such date. Since the appellant admittedly provide works contract service and the definition of works contract service specifically excludes railway from its purview for levy of Service Tax, the activities provided pursuant to the contract even after 01.06.2007 cannot be taxed under the work contract service. We find that in an identical situation, this Tribunal in the case of M.M. Constructions, Kiran Udyog (supra) has held that Serv....
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....ion 65(zzzza), w.e.f. 1-6-2007. The appellant's contention that works contract services were not taxable under ECIS prior to 1- 6-2007 was negated by the Commissioner. The appellant's contention that services provided to Railways are excluded from the ambit of works contract service, in view of exclusionary clause in the preamble portion of the definition of WCS was also negated, on the ground that the appellant was not constructing a rail line for running the metro rail but was only providing services for environmental control systems and tunnel ventilation systems which would not, according to ld. Commissioner, amount to services provided to Railways. 5. In the view of the decision of the Supreme Court in C.C.E. & Cus., Kerala v. Larsen & Toubro Ltd. - 2015 (39) S.T.R. 913 (S.C.), composite works contracts involving rendition of services coupled with deemed supply of goods by accretion are not taxable services prior to 1-6-2007, either under commercial or industrial construction service, construction of complex service, or erection, commissioning or installation service. Works contract is defined and enumerated to be a taxable service with effect from 1-6-2007 by inserti....
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....tax liability. 10. In view of the above discussions and the law laid down by the Hon'ble Supreme Court in case of Larsen & Toubro Ltd. (supra) the impugned orders confirming service tax liability on the appellants/assessees are legally not sustainable. Accordingly, the same are set aside. The appeals by the appellants/assesses are allowed. For the same reasons, the appeals filed by the Revenue are not sustainable and the same are dismissed" 4.6 From the above decisions it is evident that in all the cases the tribunal has placed reliance on the decision of the Hon'ble Apex Court in the case of L & T [2015 (39) STR 913 (SC)] wherein Hon'ble Apex Court has specifically held as follows: "24. A close look at the Finance Act, 1994 would show that the five taxable services referred to in the charging Section 65(105) would refer only to service contracts simpliciter and not to composite works contracts. This is clear from the very language of Section 65(105) which defines "taxable service" as "any service provided". All the services referred to in the said subclauses are service contracts simpliciter without any other element in them, such as for example, a s....
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....posite indivisible works contract and takes care to see that no element attributable to the property in goods transferred pursuant to such contract, enters into computation of service tax. 27. In fact, the speech made by the Hon'ble Finance Minister in moving the Bill to tax Composite Indivisible Works Contracts specifically stated :- "State Governments levy a tax on the transfer of property in goods involved in the execution of a works contract. The value of services in a works contract should attract service tax. Hence, I propose to levy service tax on services involved in the execution of a works contract. However, I also propose an optional composition scheme under which service tax will be levied at only 2 per cent of the total value of the works contract." 28. Pursuant to the aforesaid speech, not only was the statute amended and rules framed, but a Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 was also notified in which service providers could opt to pay service tax at percentages ranging from 2 to 4 of the gross value of the works contract. 29. It is interesting to note that while introducing the concept of se....
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....ought to tax as per provisions of Section 67 which stipulates that value of taxable service is the "gross amount charged" by the service provider for such services provided or to be provided by him and not the value of the goods provided by customers of service provider and the service tax cannot be charged on the value of the goods used in the contract." 41. We are afraid that there are several errors in this paragraph. The High Court first correctly holds that in the case of composite works contracts, the service elements should be bifurcated, ascertained 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 ....
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....er this contract also include i. In addition to two prototype rakes, supervision of installation of equipments on 12 rakes (12-car) of series production. ii. Supply of consumables for initial period of 6 months service and items required for commissioning of the goods supplied. iii. In addition to Commissioning of the two prototype rakes, supervision of commissioning on 12 rakes (12-car) of series production. iv. Supply of documents, design and drawings, v. Supply of software tools vi. Training of the personnel vii. Supply of spare parts, viii. Modifications required incidental services as listed in the schedule of requirements. The details of the above are given in the Schedule of Requirements at Appendix-I And has accepted a bid by the supplier for the supply of those goods and services in the sum of Euro Eight Eight Seven Four Nine Five Two Six Plus Indian Rupee Four Four Six Zero Four Three Three Three Four Four [EURO- 88,749,526 Plus INR- 4,460,433,344] (Contract price in Words and Figures) (hereinafter called "the Contract price") and the supplier has agreed to such engagement upon and s....
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....able) Total Value In Figures: EURO- 88,749,526 INR- 4,460,433,344 In Words: Euro Eight Eight Seven Four Nine Five Two Six + Indian Rupee Four Four Six Zero Four Three Three Three Four Four. Appendix-3 GENERAL CONDITIONS OF CONTRACT 1. Definitions In this Contract, the following terms shall be interpreted as indicated a. "The Contract" means the agreement entered into between the Purchaser and the Supplier, as recorded in the Contract Form signed by the parties, including all attachments and appendices thereto and all documents incorporated by reference therein. b. "The Contract Price" means the price payable to the Supplier under the Contract for the full and proper performance of its contractual obligations. c. "The Goods" means all of the equipment machinery and/ or other materials which the Supplier is required to supply to the purchaser under the Contract. d. "The Services" means those services ancillary to the supply of the Goods, such as transportation and insurance , and other incidental services such as inst....
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.....0 We confirm having accepted your offer submitted vide letter No F-0513_EMU_Bombay_MVRC-10 dated 20.05.2004 read in conjunction with all specifications, terms and conditions of the Bidding Documents, subsequent letters/ clarifications and award the Contract for i.e. work of Design, Development, Manufacture, Supply, Testing and Commissioning of 25 KV AC/ 1500 V DC Duel Voltage microprocessor control IGBT based 3- phase propulsion system and equipments as per respective specification for Broad Guage EMU Rolling Stock. Total Contract Price for the entire scope of work under the Contract shall be EURO- 88,749,526 Plus INR- 4,460,433,344 (Euro Eight Eight Seven Four Nine Five Two Six Plus Indian Rupee Four Four Six Zero Four Three Three Three Four Four). 4.10 The above excerpts from the contract show that the contract is not a contract for supply of services simplicitor but is contract for the supply of goods and incidental services. The contract is not divisible as urged by the learned authorized representative. The contract price includes cost of all items included in the scope of work, technical specifications, specific requirements, drawings and/ or under any other head....
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....ge 977, it states:- engineering, procurement, and construction contract. A fixedprice, schedule-intensive construction contract - typically used in the construction of single-purpose projects, such as energy plants - in which the contractor agrees to a wide variety of responsibilities, including the duties to provide for the design, engineering, procurement, and construction of the facility; to prepare start-up procedures; to conduct performance tests; to create operating manuals; and to train people to operate the facility. - Abbr. EPC contract. - Also termed turnkey contract. See SINGLE-PURPOSE PROJECT. 4.12 Commissioner has in his order observed as follows: "66. I observe that the noticees were entrusted with the task of conversion of 1500 Volt DC system for suburban railway section on Central Railway & Western Railway to 25,000 Volt AC; that in the transition Phase, Dual Voltage 1500 VDC / 25000 V AC equipment will be required to be fitted in suburban EMU trains. I also observe that in order to undertake the project they entered into an agreement dt 16-9-2005 with a joint venture of Siemens AG Germany & Siemens Ltd, India "for the design, development, manufacture, supp....
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....) of the Special Conditions of Contract which pertains to Commissioning (Supervision) states as follows: "Commissioning, testing & service trials of two prototype 12-car rakes in Mumbai & supervision of commissioning, testing & service trials of twelve, 12-car EMU rakes manufactured from supplied equipments in Mumbai is the responsibility of supplier and he should make appropriate arrangements as mentioned in clause 5.12 & 5.13 of Chapter 5 of the Technical Specification (VOL-II of the bid document). EMU rakes manufactured at ICF shall be transported to Mumbai on their own wheels but on their own power. The precommissioning testing of rakes at ICF & the commissioning, testing, trials of rakes in Mumbai shall be carried out by the staff of ICF, CR& WR under the supervision of supplier's Engineers. The supplier shall ensure that all equipments supplied by him and filled on the EMU rakes perform satisfactorily. In case any of the supplied equipment fails or malfunctions, supplier shall arrange its expeditious replacement under warranty obligations so that commissioning of the rakes is not delayed. Special tools, testing & measuring instruments required for precommissionin....
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....Mumbai was entrusted to the foreign service providers by the noticees ultimately resulted in the activity of commissioning the train system properly without any chances of accidents & thus 1 hold that the activity of the foreign service provider, provided to the noticees would be covered under the category of erection, commissioning or installation, 76. Furthermore. I am of the opinion that the process of erection, installation or commissioning normally involves the following three steps ... Drawing and designing for erection and installation; Carrying out the actual work of erection & installation & Commissioning of the installed item. 77. On going through the agreement dt 16.9-2005, it is clear that all the aforesaid activities were undertaken by the foreign service provider. Hence, for this reason also, I have no hesitation in concluding, that the services received by the noticees were under the category of erection, commissioning or installation services. 78. On going through the reply of the noticees, I note that the contention of the noticees was that the services rendered by the foreign service providers was in the nature of Works Contract Services IWCS). i.e.....
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....ctionaries referred above we do not find ourselves in agreement with the submissions made by the authorized representative that the contract, under consideration is a "divisible' contract, which could have been vivisected to charge the service tax in respect of certain portion attributable to supervision undertaken by the foreign service provider as per the contract. Further we also do not find ourselves in agreement with the findings recorded by the Commissioner whereby he holds that the contract was not a turnkey contract incorporating all the activities specified in the contract as one complete whole. 4.13 in case of Sentinel Rolling Shutters and Engineering Co. (P) Ltd. v. CST 1978 (4) SCC 260 wherein the Hon'ble Supreme Court was considering whether it was possible to break-up one contract into two segments - one for sale of goods and the others for providing services. The Court observed that: "The Revenue learned heavily on the provision in the contract that the delivery of the goods shall be ex-works and once the delivery of the goods is effected, no claim for rejection shall be entertained and relying on this provision, the Revenue contended that under the contract th....
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....y the constitutional bench of Hon'ble Apex Court while over-ruling the said decision. Para 64, of this decision, is reproduced below: 64.Coming back to Kone Elevators (supra), it is perceivable that the three-Judge Bench has referred to the statutory provisions of the 1957 Act and thereafter referred to the decision in Hindustan Shipyard Ltd. (supra), and has further taken note of the customers' obligation to do the civil construction and the time schedule for delivery and thereafter proceeded to state about the major component facet and how the skill and labour employed for converting the main components into the endproduct was only incidental and arrived at the conclusion that it was a contract for sale. The principal logic applied, i.e., the incidental facet of labour and service, according to us, is not correct. It may be noted here that in all the cases that have been brought before us, there is a composite contract for the purchase and installation of the lift. The price quoted is a composite one for both. As has been held by the High Court of Bombay in Otis Elevator (supra), various technical aspects go into the installation of the lift. There has to be a safety device. I....
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....e conclusion, as has been reached in Kone Elevators (supra), is based on the bedrock of incidental service for delivery. It would not be legally correct to make such a distinction in respect of lift, for the contract itself profoundly speaks of obligation to supply goods and materials as well as installation of the lift which obviously conveys performance of labour and service. Hence, the fundamental characteristics of works contract are satisfied. Thus analysed, we conclude and hold that the decision rendered in Kone Elevators (supra) does not correctly lay down the law and it is, accordingly, overruled. In our view as per the above decision, the contract which is an composite contract for the supply of the goods and services, satisfy the characteristics of a work contract. 4.15 The view taken by us is also consistent with view expressed in the earlier decisions as follows: • Daelim Industries reported [2003 (155) E.L.T. 457 (Tri.-Del)], affirmed at [2004 ( 170 ) E.L.T. A181] • Larsen and Toubro Ltd. [2004 (174) E.L.T. 322 (T)] • Rolls Royce Industrial Power (I) Ltd. [2004 (171) E.L.T. 189 (Tri.-Del.)] • And the decisions r....