2022 (8) TMI 282

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....1/- along with interest and penalties on the Appellant. 2. Briefly stated, the undisputed facts of the case are that the Appellant was awarded separate work orders for "sale/supply of goods" and provision of "Erection, Commissioning and Installation Services" thereof by M/s. Tata Steel Limited ('TSL') during the period from 2006 to 2011. The goods supplied under the supply work orders were procured by the Appellant from different manufacturers and consigned directly to the 'TSL' site at Jamshedpur, with applicable VAT/CST. The Appellant had also discharged the applicable service tax on the provision of "Erection, Commissioning and Installation Services" based on the monetary consideration agreed in the respective service work orders. Pur....

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....ant has assailed the order dated 23rd November 2012 on the following alternative grounds: A. The work order for "supply/sale of goods" and provision of "Erection, Commissioning and Installation Services" respectively, are separate and distinct contracts. The levy of tax on sale of goods is within the exclusive domain of the State legislature whereas tax on services comes within the ambit of the Parliament. It is settled by the decision of the Hon'ble Supreme Court that levy of VAT/Service Tax are mutually exclusive [Imagic Creative - 2008 (9) STR 337 (para 28)] and that the value of goods cannot be included in the value of services or vice versa [Bharat Sanchar Nigam Ltd. - 2006 (2) STR 161. Therefore, higher/lower profit margin arising ....

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....rave;-vis the charge in the SCN. Therefore, the demand cannot sustain on the point of incorrect classification alone. Reference in this regard is invited to the following decisions: (i) URC Construction (P) Ltd. Vs. CCE, Salem - 2017 (50) STR 147 (Para 8 to 11) (ii) Ajit India Pvt. Ltd. Vs. Commissioner of ST, Mumbai-II - 2018 (19) GSTL 659 (Para 4.2 to 4.4). C. The Ld. Commissioner has generalized the observation regarding extraneous profit margin on supply of goods by comparing the manufacturer's invoice vis-à-vis the corresponding invoice of the Appellant in one stray instance as opposed to calculating the profit margin on supply of goods at the work order level. The sample manufacturer invoice vis-à-vi....

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.... taxable services. At the outset, there is considerable merit in the contention of the Appellant that composite contracts involving supply of both goods and services could not have been taxed under the category, "Erection, Commissioning and Installation Services" in view of the law laid down by the Hon'ble Supreme Court in the L&T case (supra) as under, '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 sub-clauses ....

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.... the case of the Appellant on this point. 7. The issue can be looked at from another angle, as well. The composite contracts in this case were divided into supply obligation and service obligation between the parties inter se for a pre-agreed monetary consideration. Since the work order for "Erection, Commissioning and Installation Services" was for consideration in money, the gross amount charged for such services alone could be subjected to service tax under Section 67(1)(i) of the Finance Act. The valuation framework as contained in Section 67 of the Finance Act does not seek to include within its ambit, any amount charged for sale/supply of goods and we are in complete agreement with the Appellant that higher or lower profit margin w....