TaxTMI 
TaxTMI 
2023 (9) TMI 1255
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....t the site of TSL. The above agreement was composite contracts for supply of spare as well as repair and maintenance jobs, for which the appellant charged maintenance and onsite support site charges. Further, the appellant also charges per hour basis towards supply of spare parts. The appellant discharged VAT on the entire value of spare parts supplied to TSL. The show cause notice was issued to the appellant on 29.09.2010 proposing demand of service tax by invoking extended period of limitation alleging that the appellant has arbitrarily split the gross amount of the agreement towards spare parts and supply of service and that the appellant had inflated the value of spare parts charges and included the value of onsite management services in the value of spare parts and thus evaded payment of service tax. The matter was adjudicated, demand of service was confirmed. Against the said order, the appellant is before us. 3. The Ld.Counsel for the appellant submits that the said issue has been decided by this Tribunal in the case of Gainwell Commosales Private Limited v. Commissioner of Central Excise & Service Tax, Ranchi [2023-VIL-600-CESTAT-KOL-ST]. Therefore, the impugned order is....
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....al that for the period post 01.06.2007, the maintenance and repairs and XGS services are classifiable under works contract service. Whether services under works contract service is taxable or not this Tribunal has observed has under:- "We find that for the first time Section 65(105)(zzzza) set-out to tax the service as Works Contract service for levy of service tax on the works executed along with the material and the said condition is enumerated hereunder :- "11. By the Finance Act, 2007, for the first time, Section 65(105)(zzzza) set out to tax the following :- "(zzzza) to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams. Explanation : For the purposes of this sub-clause, "works contract" means a contract wherein, - (i) Transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and (ii) Such contract is for the purposes of carrying out, - (a) Erection, commissioning or installation of plant, machinery, equipment or structure....
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....or example, a service contract which is a commissioning and installation, or erection, commissioning and installation contract. Further, under Section 67, as has been pointed out above, the value of a taxable service is the gross amount charged by the service provider for such service rendered by him. This would unmistakably show that what is referred to in the charging provision is the taxation of service contracts simpliciter and not composite works contracts, such as are contained on the facts of the present cases. It will also be noticed that no attempt to remove the non-service elements from the composite works contracts has been made by any of the aforesaid Sections by deducting from the gross value of the works contract the value of property in goods transferred in the execution of a works contract. 25. In fact, by way of contrast, Section 67 post amendment (by the Finance Act, 2006) for the first time prescribes, in cases like the present, where the provision of service is for a consideration which is not ascertainable, to be the amount as may be determined in the prescribed manner. 26. We have already seen that Rule 2(A) framed pursuant to this power has ....
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....he caterory of Maintenance and Repair service/'Business Support Service'/'Business Auxiliary Service'." 12. Further in the case of SEW Infrastructure Ltd. (supra) this Tribunal has observed as under:- "20. What transpires from a perusal of Annexure ‗A' is that the work order is a composite contract comprising services as well as goods. This would be clear from serial no. 6 which mentions ‗Earth work in excavation for levelling and grading using borrowed good earth'. It specifies that borrowed good earth has to be arranged by the contractor at its own cost. There can be no manner of doubt that the work order comprises both the service element as well as the goods element. 21. Keeping this in mind that it has to be examined whether the work to be performed would actually fall under the category of 'site formation' service. 'Site formation' has been defined in section 65(97a) of the Finance Act in the following manner : "(97a) site formation and clearance, excavation and earthmoving and demolition‖ includes, - (i) drilling, boring and core extraction services for construction, geophysical, geological or similar purposes; ....
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....s for a consideration which is not ascertainable, to be the amount as may be determined in the prescribed manner. 26. We have already seen that Rule 2(A) framed pursuant to this power has followed the second Gannon Dunkerley case in segregating the 'service' component of a works contract from the 'goods' component. It begins by working downwards from the gross amount charged for the entire works contract and minusing from it the value of the property in goods transferred in the execution of such works contract. This is done by adopting the value that is adopted for the purpose of payment of VAT. The rule goes on to say that the service component of the works contract is to include the eight elements laid down in the second Gannon Dunkerley case including apportionment of the cost of establishment, other expenses and profit earned by the service provider as is relatable only to supply of labour and services. And, where value is not determined having regard to the aforesaid parameters, (namely, in those cases where the books of account of the contractor are not looked into for any reason) by determining in different works contracts how much shall be the percentage of the tot....
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..... This is also for the simple reason that there is no subterfuge in entering into composite works contracts containing elements both of transfer of property in goods as well as labour and services." 23. The view expressed by the Supreme Court in the aforesaid decision was reiterated by the Supreme Court in Total Environment Building Systems and the relevant paragraphs of the judgment are reproduced below : "20. Service tax was introduced in India vide the Finance Act, 1994. Service tax is legislated by Parliament under the residuary entry i.e. Entry 97 of List I of the Seventh Schedule of the Constitution of India read with Article 248 of the Constitution. The service tax provisions have the following basic scheme: (i) Section 65 of the Act provides for taxable services; (ii) Section 66 of the Act provides for the charge of service tax by the person designated as ―the person responsible for collecting the service tax" for the Government; (iii) Section 67 of the Act provides for the value of taxable service which is to be subjected to 5% service tax; and (iv) Section 68 of the Act provides for the collection and pa....
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....s contract became leviable. Therefore, till then it was not so leviable as there was no concept of works contract under the said Act. 24. Recognizing this aspect of the matter in Larsen and Toubro Ltd. (supra), this Court held that Service Tax on works contract was not leviable, meaning thereby, that such tax on the service component of works contract as defined above did not attract Service Tax prior to the amendment. 26. Therefore, reliance placed by the assessees in the present case on the aforesaid judgments is just and proper. On the other hand, the contention of Ms. Diwan, Learned ASG to the effect that even prior to the aforesaid amendment being made to the Finance Act, 1994 service tax on works contract was leviable is not correct. It was being levied on purely service contract and not on service element of works contract as there was no definition of a works contract till then. Hence, the amendment made to the Finance Act, 1994 by insertion of the definition of works contract as under clause (zzzza) is not clarificatory in nature. Having found that the Service Tax was not at all leviable on service element of a works contract, Parliament felt the need for....
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....ue of property in goods [or in goods and land or undivided share of land, as the case may be] transferred in the execution of the said works contract. Explanation. - For the purposes of this clause,- (a) gross amount charged for the works contract shall not include value added tax or sales tax, as the case may be, paid or payable, if any, on transfer of property in goods involved in the execution of the said works contract; (b) value of works contract service shall include, - (i) labour charges for execution of the works; (ii) amount paid to a sub-contractor for labour and services; (iii) charges for planning, designing and architect's fees; (iv) charges for obtaining on hire or otherwise, machinery and tools used for the execution of the works contract; (v) cost of consumables such as water, electricity, fuel used in the execution of the works contract; (vi) cost of establishment of the contractor relatable to supply of labour and services; (vii) other similar expenses relatable to supply of labour and services; and (viii) profit earned by the service provider relatable to supply of ....
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....se in hand, the service has been classified under works contract service and the value of goods supplied is ascertainable on which they have paid VAT, therefore, the same has to be excluded from the value of works contract to ascertain the value of taxable service provided by the appellant. Rule 2A(c) of the Valuation Rules only applies in case the value of goods supplied was not determined under the Rule 2A of the Rules. But, in the case in hand, value of material supplied has already been ascertained and VAT has been paid thereon, in that circumstances, we hold that for the period post 01.07.2002, the taxable value is to be determined in terms of Rule 2A(i)(c) of the Valuation Rules, 2006, therefore in view of the above, this issue is also answered in favour of the Appellant. (c) Whether in the facts and circumstances of the case extended period of limitation is invocable or not? 16. As whole case is interpretation of the provisions of Service Tax (Determination of Value) Rules, 2006 and classification of the services therefore we hold that extended period of limitation is not invocable in the facts of the present case. Accordingly, the said issue is also answer....