TaxTMI 
TaxTMI 
2024 (4) TMI 433
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Power Plant of 3x660 MW capacity in Lalitpur. M/s LPGCL assigned certain works to the Appellant pertaining to miscellaneous procurements, supply and construction works at the project site. A copy of contract agreement dated 20.01.2011 between M/s LPGCL and the Appellant is part of the Appeal Paper Book. That in March, 2013 the Officers of Central Excise Commissionerate, Kanpur audited the records of the Appellant for the period from April, 2011 to June, 2012 and observed as under:- i. The Appellant was paying Service Tax @4.12% under Composite Scheme of Works Contract undertaken by the Appellant for carrying civil construction work at project site of M/s LPGCL at Lalitpur; ii. As per the contract agreement between M/s LPGCL and the Appellant, the Appellant was required, inter alia to undertake "improvement and strengthening of road from Lalitpur to the project site to facilitate transportation," iii. The work of construction of road was entrusted by M/s LPGCL to the Appellant and it was a part of miscellaneous works in the power project. It is further stated in the Audit Report that the construction of road was not recognized as a separate activity and t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....thority further held that the construction of road was undertaken to facilitate movement of heavy material and machinery relating to power project of M/s LPGCL and the road so constructed was not meant for general public but for specific purpose of facilitating the movement of heavy material and machinery of M/s LPGCL. In appeal, the Appellate Authority has rejected the appeal and upheld the Order-in-Original on the ground that the contract awarded by M/s LPGCL to the Appellant was a single composite contract in which improvement and strengthening of road from Lalitpur NH to the power plant site is one of the works of the composite contract. Being a part of single composite contract, the consideration received for construction of road is a part of gross taxable value for the purpose of levying service tax. The Appellate Authority admitted that in view of the Certificate issued by the Public Works Department [PWD], Lalitpur, the ownership of the road in question was in the possession of PWD. However, the Appellate Authority has denied the benefit of service tax exemption on the ground that the road so constructed was a part and parcel of composite contract and no separate price bifu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....given by M/s LPGCL to the Appellant was a comprehensive, single composite contract including construction of roads and in such a case, service tax was leviable on gross amount charged for construction services including value of construction of road. That the Appellate Authority failed to appreciate that in para 14.5 of CBEC Circular No.B-1/6/2005-TRU dated 27.07.2005, the Board has clarified that though construction of road is not liable to service tax, if there is a single contract for construction of commercial complex and construction of road is not recognized as a separate activity, service tax would be leviable on the gross amount charged for construction including value of construction of road. The Revenue was under impression that the contract between the Appellant and M/s, LPGCL was a comprehensive contract which also covered construction of road from National Highway to power plant and in the said contract, various types of work including road construction were not segregated. Therefore, the value received by the Appellant for construction of road was includible for arriving at correct amount of service tax payable by the Appellant. That the Appellate Authority failed to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., New Delhi - (2023) 7 Centax 134 (Tri.-Del.); • Orissa Bridge & Construction Corpn. Ltd., vs. Commissioner of Central Excise, Bhubaneswar - 2011 (264) E.L.T. 14 (S.C.). 4. Learned Departmental Authorized Representative justified the impugned order and prayed that the appeal filed by the Appellant be dismissed being devoid of any merits. 5. Heard both sides and perused the appeal records. 6. We find that the Lower Authorities have taken a view that work awarded by M/s LPGCL to the Appellant is a comprehensive, single composite contract and the contract price of the complete scope of works is specified in clause 5.1 of the agreement as sum total of sub-contractor's order value plus 7.5% of such value as service charges to the contractor (Appellant). The Appellate Authority has thus concluded that it is a single contract in terms of works as well as payment conditions and therefore para 14.5 of CBEC Circular No.B-1/6/2005-TRU dated 27.07.2005 is applicable and as such service tax would be leviable on the gross amount charged for the construction including value of construction of roads. 7. We find that the Circular dated 27.07.2005 was issued by the Board....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he contract for construction of commercial or industrial buildings is a single contract and even the construction or road is not recognized or identified in the contract as separate activity then service will be payable on the entire value of the service without exclusion of construction of roads. The Appellant submits that the clarification contained in para 14.5 is not applicable in their case for the primary reason that construction and strengthening of road from Lalitpur to the project site of M/s LPGCL is specifically identified as separate activity in the scope of work prescribed in para 3.1 of the contract. That further the value of the road construction service can be determined separately by relying upon the parameters of para 5.1 of the Agreement, as the value of sub- contractor's order value plus 7.5% markup / service charges of the contractor (Appellant). The bills raised by the sub-contractor M/s Subhash Infraengineers Pvt. Ltd. engaged for construction of road from NH to the project site / power plant is part of the Appeal Paper Book. Based on these bills, the Appellant have raised 3 Tax Invoices to M/s LPGCL for aggregate value of Rs.23,09,51,600/- mentioned in p....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and argued that the value of construction of road needs to be included in the gross taxable value of construction of complexes and therefore the approach roads constructed upto the weigh bridges could not be excluded from the total value of construction services. However, the CESTAT did not find any merit in the arguments of the Ld. AR in as much as roads were constructed by the Appellant to facilitate movement of transport vehicles to the bridges and the same is not a part of complex and therefore the Bench held that the Appellant has correctly excluded the value of roads from the total value of construction of weigh bridges while claiming the abatement from the taxable value for the purpose of service tax. The clarification in para 14.5 of the Board's Circular dated 27.07.2005 is not applicable in the present case for the reason that the construction and strengthening of road from Lalitpur NH to the project site is separately mentioned /identified within the scope of work in para 3.1 of the contract agreement between the Appellant and M/s LPGCL. The road construction is identified as separate item of work to be executed by the Appellant for M/s LPGCL. Hence the value of road....
X X X X Extracts X X X X
X X X X Extracts X X X X
....including area grading of entire site of approx. 1300 acres excavations and leveling. (ii) Construction of internal roads and path ways, boundary walls, internal & external drainage, diversion and reconstruction of public pathways passing through the site. (iii) Improvement & strengthening of road from Lalitpur to Site including to facilitate transportation. (iv) Preparation of miner bund of the river, closing of wells, closing of Nullahs, rehabilitation of temple area etc. (v) Railway system from nearest railhead up the site including Loop line for transportation of coal as per specification and map. (vi) Housing colony and related amenities as per specification & plan. (vii) Raw water system including reservoir, as per the specification and map. (viii) Construction water supply system. (xi) Construction of structures and buildings under the scope of CSR and R&R activities in and around the villages. (x) Any other civil work required as enabling work for Construction like temporary hutments, contractor and labour hutments. That as per clause 5.1 of the contract, it was agreed that the total c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....contract, the scope of work has been divided into major segments. Improvement and strengthening of road from Lalitpur National Highway to the project site has been separately described as one of the segments/ packages. In view of this clause, it cannot be said that the construction of road in question was not recognized as a separate activity under the contract. It is not required to enter into a separate contract for construction of road. It is submitted that even if the party entered into a single contract with M/s LPGCL for performing misc. works of procurement, supply and construction relating to the thermal power project, the construction of road in question is enumerated as a separate work. The party has claimed that even the value of the work for road construction is separately defined in clause 5.1 as sum total of payment made to the subcontractor 7.5% thereof as service charges to the contractor (party). Therefore the clarification issued by the Board in para 14.5 favouring levy of service tax on the gross amount charged for construction including value of roads is not applicable in the present case. I have observed that the work is given to the party as a comprehensive, s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ded in the gross taxable value, therefore, the approach roads constructed by the appellant to weigh bridges cannot be excluded from the total value of the construction services undertaken by them. We don't find merit in the argument of the Ld. AR for the Revenue, inasmuch as, the present roads have been constructed to facilitate the movement of the transport vehicles to weigh bridges and is not a part of the residential complexes, therefore, its value cannot be subjected to service tax and the appellant has rightly excluded the same from the total value of construction of weigh bridges in claiming the abatement under the respective notifications." 18. Appellant have categorically stated that the activity of construction of roads was separately enumerated in the contract for which separate value have been provided in the contract. Hence the activity was separate activity and the contract could not have been considered as a composite contract for the entire project. 19. Impugned order succinctly lays down the terms of contract and Clause 3, specifically provide the scope of work to be undertaken, identifying the activity of strengthening of this road as an activity. Further Cla....
X X X X Extracts X X X X
X X X X Extracts X X X X
....opening part of Clause 18 are words of great amplitude, wide enough to cover even a claim for damages, but it is a well settled rule of interpretation applicable alike to instruments as to statutes that the meaning of ordinary words is to be found not so much in strict etymological propriety of language nor even in popular use as in the subject or occasion on which they are used and the object which is intended to be attained. The context and collocation of a particular expression may show that it was not intended to be used in the sense which it ordinarily bears. Language is at best an imperfect medium of expression and a variety of meanings may often lie in a word or expression. The exact colour and shape of the meaning of any word or expression should not be ascertained by reading it in isolation, but it should be read structurally and in its context, for its meaning may vary with its contractual setting. We must, therefore, read the words 'any claim for the payment of a sum of money' occurring in the opening part of Clause 18 not in isolation but in the context of the whole clause, for the intention of the parties is to be gathered not from one part of the clause or the other b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the conclusion that clause is ambiguous, and that it has two possible meanings. In those circumstances, the court has to prefer one above the other in accordance with the settled principles. If one meaning is more in accord with what the court considers to be the underlined purpose and intent of the contract, or part of it, than the other, then the court will choose the former or rather than the latter..." (emphasis supplied) 27. Interpretation of contracts concerns the discernment of the true and correct intention of the parties to it. Words and expressions used in the contract are principal tools to ascertain such intention. While interpreting the words, courts look at the expressions falling for interpretation in the context of other provisions of the contract and also in the context of the contract as a whole. These are intrinsic tools for interpreting a contract. As a principle of interpretation, courts do not resort to materials external to the contract for construing the intention of the parties. There are, however, certain exceptions to the rule excluding reference or reliance on external sources to interpret a contract. One such exception is in the case ....