TaxTMI 
TaxTMI 
2022 (9) TMI 902
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.... done by the Commissioner. 3. This order dated 04.12.2015 of the Tribunal was assailed by the Department before the Supreme Court [Civil Appeal No. 4928 of 2018 Commissioner of Central Excise, Raipur vs. M/s. Sepco Electric Power Construction Corporation decided on 11.07.2022]. The Supreme Court held that the Tribunal was not justified in holding that the appellant was not covered under the definition of 'consulting engineer'. The order passed by the Tribunal was, therefore, set aside and the matter was remitted to the Tribunal to examine and decide the appeal on the other grounds raised in the appeal memo. 4. This is how the matter has again come up before the Tribunal. 5. The issue that has now been raised for consideration is as to whether the appellant had undertaken a composite engineering, procurement and construction [EPC] contract on a turnkey basis, because if this is the case, then no part of the contract could have been separately subjected to levy of service tax by treating it to be a service rendered by a 'consulting engineer'. 6. To appreciate this issue, it would be necessary to refer to the contract entered into by the appellant with M/s Bharat Aluminium....
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....rage & handling, civil works, erection, testing, commissioning, insurance against Erection All Risks, training, trial operation and handing over of the complete equipment and works for 5x135 MW coal-fired power plant as described in the Volume II (Technical Proposal) and Volume III (Bid Proposal Sheets) on turnkey basis. SEPCO shall also be responsible for the successful execution of performance guarantees tests for the entire Plant." (emphasis supplied) 2. Price: SEPCO, as the EPC Contractor, hereby quote the price covering the works as described in Paragraph 1) on turnkey basis of USD228,923,000.00 (Say US Dollar two hundred and twenty-eight million nine hundred and twenty-three thousand only) and INR3,755,210,000.00 (Say Indian Rupees three thousand seven hundred and fifty-five million two hundred and ten thousand only) with detailed break-down as shown in Annexure I. In order for convenience of bid evaluation and future tax clearance during the execution of Contract, the Bid Price will be broken down into following five portions: Design & Engineering USD12,082,000.00 Other Offshore Services USD54,571,000.00 Offshore Supplies USD16....
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....ct Management), Offshore Supply, Onshore Supply and Onshore Services. xxxxxxxxxxx 10 Schedule: • Unit one completion in 24 months from contract effective date. • Unit two completion in 25 months from contract effective date. • Unit three completion in 28 months from contract effective date • Unit four completion in 31 months from contract effective date 11. It is on 26.04.2003 that the appellant entered into five agreements with BALCO. One such agreement is a Guarantee Agreement involving the four projects. The relevant portion of this Guarantee Agreement is reproduced below: Guarantee Agreement For EPC Contract on Turnkey Basis for the BALCO Captive Power Plant Project WHEREAS: A. The Owner/Purchaser is desirous of procuring, setting up and bringing into commercial operation a 4 x 135 MW coal based captive power plant ("the Facility") at BALCO, Korba in the State of Chhattisgarh, India (hereinafter called "the Project"). B. The Owner/Purchaser represents, warrants and declares that it has obtained and/or obligated to obtain all necessary statutory permissions/clearances ....
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....he Project Contracts in the aggregate shall be deemed to be the whole works, without any omission, gap or alteration due to interpretation of each individual definition of scope of works under each applicable Project Contract. 2. Guarantee xxxxxxxxxxx 2.1.2 Completion of the Facility within the stipulated time being the most important feature of the Project, the Project Contractors shall arrange to effect deliveries of the materials, Plant and Equipment in the manner and sequence so as to meet the Completion Schedule as specified in Schedule-3 of the Project Contracts. xxxxxxxxxxx 4. EFFECTIVENESS AND TERMINATION This Guarantee shall come into force and effect upon the receipt of the Project Contractors of the Notices to Proceed under all the Project Contracts and shall remain in force till all the obligations, duties and performance of the Project Contractors are duly fulfilled and discharged under the Project Contracts or the earlier date of the termination of this Guarantee by mutual consents. 'If under any of the Project Contracts, the Project Contractor is entitled to an extension of the time of com....
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....rices are concerned; that the Noricee have entered into the said four contracts including the impugned contract with M/s. BALCO for different scope of works and activities as under:- Contract No. BALCO- SEPCO-01: Off shore Supply Contract for the BALCO Captive Power Plant Project. Contract No. BALCO- SEPCO-02: Contract for Off shore Engineering and Technical Services for the Captive Power Plant Project. Contract No. BALCO- SEPCO-03: On shore Supply contract for the Captive Power Plant Project. Contract No. BALCO- SEPCO-04: On shore Services & Construction Contract for the Captive Power Plant Project. 6.5.1 On perusal of the above four contracts and Guarantee Agreement for EPC contract on Turnkey Basis relating to the Captive Power Plant Project it is observed that each of the contract has been executed for a different set of works and activities and for a specified contract price as mentioned in each of the contracts. It is thus apparent from the contracts themselves that all the four contracts under the EPC contract are separate contracts and these are segregated from one another in terms of scope of works and prices as well. The Noticee....
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....rned authorized representatives appearing for the department have been considered. 17. According to the appellant, EPC contract on a turnkey basis was executed with BALCO to set up a captive a power plant, though for the sake of convenience the contractually liability was spread into five contracts. To support this plea, the appellant has placed the relevant clauses of the Tender Enquiry which shows that BALCO desired to have a captive power plant installed on EPC basis. The Bid Document submitted by the appellant also shows that the appellant had offered a bid for the EPC contract. The Letter of Intent dated 24.01.2003 also shows that it was for EPC contract. According to the appellant, the cross fall breach condition in the Guarantee Agreement, which is to the effect that termination any of the four project contracts, would be deemed to be termination of all the project contracts would show that all the four projects are integral part of a single works contract and each contract could not have been subjected separately to service tax. 18. In order to appreciate this contention it would appropriate to refer to the provisions of section 65 (105)(zzzza) of the Finance Act that....
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....ntire Plant. 21. The Price Clause contained in clause 2 of the Bid Document also shows that the price covering the aforesaid works described in clause 1 on turnkey basis was USD228,923,000.00 and only for the sake of convenience of bid evaluation and future tax clearance during the execution of the contract, the bid price was broken up into following five portions: Design & Engineering USD 12,082,000.00 Other Offshore Services USD 54,571,000.00 Offshore Supplies USD 162,270,000.00 Onshore Supplies INR 1,466,910,000.00 Onshore Services INR 2,288,300,000.00 22. The Letter of Intent issued ....
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....executed on a turnkey basis and only for the sake of convenience it had been split up into four sub-contracts. The relevant portion of the judgment is reproduced below: "22. Upon a careful reading of this agreement, we are satisfied that the contract though, for the sake of convenience, was split up into four subcontracts (viz. the four work/ purchase orders), was a composite contract executable on a turnkey basis. The terms of this turnkey contract were reduced into writing by the "wrap-around agreement" of 10.5.2000. We are of the definite view that under the "wrap-around agreement", the Appellant had the right to encash any or all of the guarantees for any breach in any of the terms of the four contracts." 27. In Indure Limited tenders were invited by NTPC for construction of ash handling plant package, for its Farakka Super Thermal Power Project on turnkey basis. The bidder was required to quote a lump sum price in its proposal for the entire scope of work covered under the bid documents. After the bidding, the total contract was agreed to be divided into two separate contracts, (i) supply contract, and (ii) erection contract, with the cross-fall breach clause....