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2024 (3) TMI 231
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....machinery and machinery parts and also undertaking works contracts for large projects involving service and sale of goods as works contracts. 2.1 The Aravali Power Corporation Private Limited (APCPL) and Damodar Valley Corporation (DVC) invited global tenders for erection, construction, installation of Coal Handling Plants at various locations. The appellant participated in the International Competitive Bidding and was awarded two contracts each by APCPL and DVC and one for sale of plant and equipment and one for services in the nature of works contract for civil works, structural works, installation etc.. 2.2 Under the sale contract, the property in the goods were transferred to APCPL and DVC at the time of handing over the goods to the transporters and thereafter, those goods were handed over to the appellant free of cost by APCPL and DVC for providing services with respect to those goods, which also included transfer of property in certain other goods used by the appellant while rendering services under Contract II qualifying this contract as a "works contract". 2.3 As per the terms of agreement, the appellant was required to execute two separate contracts, i.e. Contrac....
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....that sales tax is not shown on the invoice is not based on the correct position in law. Non-mention of tax amount in the invoice was due to the contract terms specifying that all tax liabilities shall be borne by the appellant. In any case, disclosing of tax amount on the invoice does not decide whether the transaction is sale or not. In any case, this basis adopted in the impugned order was beyond the allegations in the impugned show cause notices. 3.2 He further submitted that the appellant has opted to pay service tax under Rule 3(1) of the Composition Scheme which stipulates that notwithstanding anything contained in section 67 of the Act and rule 2A of the Service (Determination of Value) Rules, 2006, the person liable to pay service tax in relation to works contract service shall have the option to discharge his service tax liability on the works contract service provided or to be provided, instead of paying service tax at the rate specified in section 66 of the Act, by paying an amount equivalent to 2%, 4% or 4.8% on the gross amount charged for the works contract. It is provided by way of an explanation that for the purposes of this sub-rule, gross amount charged for the....
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....ase, the execution of work under Contract I & II has commenced prior to 07.07.2009 and invoices were raised or payments were received. Therefore, in terms of Rule 3(1) of the Composition Scheme vide Notification No.150/1/2012-ST dated 08.02.2012, the value of Contract I cannot be included for determination of gross value for payment of service tax under the Composition Scheme. To support, he relies on the following decisions : a) Essar Projects (I) Ltd vs CCE - 2014 (33) STR 696 (T) b) Tata Projects Ltd vs CST - 2019 (2) TMI 1037 - CESTAT Hyd c) CCE vs Kalpataru Power Transmission - 2021 (48) GSTL 354 (T) Therefore, he prayed that the impugned order is to be set aside and the appeals be allowed. 4. On the other hand, the ld.A.R. for the Revenue supported the impugned order and submits that the appellant has entered into two separate contracts to avoid the payment of service tax on gross value of services provided and supplied by them, therefore, the value of goods sold under Contract I is to be added to the value of goods sold under Contract II for payment of service tax liability under the Composition Scheme. 5. Heard both sides and considered t....
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....ct has commenced or where any payment, except by way of credit or debit to any account, has been made in relation to the said contract on or before the 7th day of July, 2009." Where execution of works contract has commenced prior to 7-7-2009 or where any payment (except payment through credit or debit) has been made towards a works contract prior to 7-7-2009, then in those cases 'gross amount' for the purpose of payment of service tax does not include the value of free of cost supplies. 4. The above clarification may be communicated to the field formations and service tax assessees through Trade Notice/Public Notice. Hindi version to follow." As per the said Circular, the explanation has been appended to Rule 3 (1) of the Composition Scheme, which clearly shows that the contract entered prior to 07.07.2009, the value of cost of free supply will not be includible to determine the gross amount for the purposes of payment of service tax. 7. The same view has been taken by this Tribunal in the case of Essar Projects (India) Limited (supra), wherein this Tribunal has observed as under : "9.1 It is clear from the above Circular issued by C.B.E. & C. that where exe....
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....nsideration for the sale of CKD packs, for the various reasons stated by the Assistant Collector in his order. According to the learned Solicitor General, the price mentioned in the invoices was (or should have been) determined by taking into consideration the lumpsum of 15 million French Francs (nearly three crores of Rupees) paid by the respondents to the foreign collaborator under the agreement. It is on this basis Section 14(1)(a) was excluded and resort to Section 14(1)(b) of the Customs Act was sought to be justified by the revenue. In appreciating the above plea we have to bear in mind certain basic principles. The bargain between the respondents and the foreign collaborator is evidenced by written agreements, (dated 6-11- 1979 & 6-3-1980). There is no material nor was it suggested that the dealings between the parties are not at arm's length. No evidence is available to show that the payment of royalty to the collaborator induced any extra commercial obligation for the price of CKD packs, parts and components. Ordinarily the Court should proceed on the basis that the apparent tenor of the agreements reflect the real state of affairs. It is, no doubt, open to the revenue to ....
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....ellants need to be included in the value of services rendered by them under the works contract scheme. It is not in dispute that the material in question was supplied by the appellant with respect to this particular contract and after the supply was completed, the goods which were supplied were given by APPDCL back to appellant for execution of the contract. A plain reading of CBEC circular D.O.F. No. 334/13/2009-TRU, dated 06.07.2009 explains that such values became includible in the value of the works contract as per the amendment made vide notification NO. 23/2009-ST, dt. 07.07.2009. By inserting an explanation, it was also clarified by CBEC themselves that the inclusion of the values would not apply to such contracts where either the execution of works contract has already started or any payment (whether in part or in full) has been made on or before 07.07.2009. In this particular case, the payments in respect of all the three contracts were made prior to 07.07.2009. Needless to say that there is no separate payment under the umbrella contract because it was only a combination of the other three contracts. This issue was agitated by the appellant before the adjudicating authori....
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....cheme for payment of Service Tax) Rules, 2007 is not relevant. On a plain reading of the contracts in question, we do not find it so. There are indeed three different contracts and for which three different payments were to be made and were made. The umbrella agreement only combines all these three agreements so as to give a complete perspective of the scope of the contract. In fact, there is no payment whatsoever under the umbrella agreement. Further, the advances in respect of the three contracts were received prior to 07.07.2009 and hence the amended provisions do not apply. In view of the above, we find that the value of the material supplied under off-shore and onshore contracts cannot be included in the value of the works contract service as the advance payment in respect of all the three contracts are received prior to 07.07.2009. 9. We also find that this case is identical to the case of ESSAR Projects (India) Limited (supra) in which a similar view has been taken. In view of the above, we find that the demand of service tax and interest and imposition of penalties in the impugned order are not sustainable and the impugned order is liable to be set aside and we do ....