TaxTMI 
TaxTMI 
2024 (7) TMI 70
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....l the three show cause notices is the same. 2. National Dairy Development Board (herein after referred to as 'NDDB' or 'Appellant') is a statutory body corporate formed by an Act of Parliament namely the National Dairy Development Board Act, 1987 and its functions include promoting, planning and organizing Programs for the purpose of development of dairy and other agriculture-based industries on an intensive and nation-wide basis. The appellant is registered with Service Tax authorities vide registration No. AABCN2029CST008. The appellant had executed agreements with various customers under the category of 'Consulting engineering service' for designing, planning, promoting, developing, constructing, sponsoring and setting up of dairy industries and undertaking any other related promotional activity including the financing of the same. These agreements were executed for providing 'Consultancy Services/ Consulting Engineering Service' in relation to the execution of a project for creation of the Dairy Distribution System. The appellant had been discharging service tax on a value comprising of 5% of total cost of the project received by them as fee/charges for provi....
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....tual cost of the project. Accordingly, NDDB calculated the taxable value and paid the service tax under the category of "Consultancy Engineering Service"; One such Agreement dated 28.11.2008 was entered into with M/s. Bhopal Sahakari Dugdha Sangh Maryadit Bhopal (hereinafter referred to as Project Authority or BSDSM) for Bhopal Dairy Expansion Project, i.e. BSDSM project, where on behalf of BSDSM, NDDB appointed 8 (eight) different contractors for civil work, supply of equipments, architecture etc.; as per terms and conditions, contractor had to issue bills inclusive of all taxes, in the name of Chief Executive Officer, BSDSM, Bhopal Dairy Plant, Habibgunj, Bhopal and bills to be submitted to Group Head (Purchase), NDDB, Anand for necessary payment thereof; this method was being followed by NDDB for all the contracts they had undertaken to execute. 3.2 It has been the contention of the Department that looking to the nature of jobs executed by NDDB viz. Engineering consultancy, procurement, commissioning and transfer of property under turnkey agreement, it was not merely a Consultant Engineering Services (CES) but was much beyond the limit of 'CES'; that though NDDB in some cases....
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.....2014. In further appeal against the adjudication order dated 12.09.2014, the matter was further remanded back by CESTAT Ahmedabad vide No. A/11577/2015 dated 28.10.2015 to decide the matter afresh with specific reference to the issue whether the impugned service was 'Consulting Engineering Service' or the 'Works Contract Service'. In the meantime, two more show cause notices dated 19.05.2014 and 20.10.2015 were issued to the appellants for the subsequent periods covering the same issue and the impugned order is a combined order adjudicating upon all the three show cause notices. The appellant had challenged the show cause notices on the preliminary grounds that the subsequent show cause notices dated 19.05.2014 & 20.10.2015 were in the form of statements of notice which were not valid as the provisions of law with respect to classification of services had changed with effect from 01.07.2012. On merits, the appellants had contested the allegations with respect to taxability under the category of 'Works contract Service' against the declared service of 'Consultancy engineering service' by them. 3.4 The Ld. Commissioner, vide the combined impugned order dated 12.05.2016 has confir....
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....ific contracts to local parties. The appellant was also to provide training to different categories of the persons/ staff of project Authority; upon completion of the erection work, NDDB shall commission and run the plant for 15 consecutive days in the presence of the representatives of the Project Authority; after completion of the trial runs the project authority should take over the plant and sign the handing over / taking over documents; that the handing over/ taking over documents to be submitted by the NDDB to the Project Authority will consist of a list showing the inventory of various machinery and equipment installed in the plant along with order copies, Audited statements of expenditure in respect of items/ material, which are used in erection or as consumables. It has further been mentioned in the impugned order that the NDDB was making payments directly to the concerned parties for Raw materials and consumables stores necessary for the commissioning and operation of the plant; that as per the contract Project authority had to pay NDDB an advance not less than 30% of the approved estimated cost of the plant and equipment and civil work within 15 days of signing this agre....
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....roject Authority and towards the NDDB. This is because EPC / Turnkey contracting in question leaves the NDDB to decide how it will meet the Project Authority's requirements within the agreed price with maximum profit. It is in the contractor's/ the NDDB's interest to meet the Project Authority's requirements at the minimum cost, thereby maximizing its own profit. Thus, NDDB stands to earn on three counts: (i) a consultancy service fee at the rate of 5% (Five PERCENT) of the overall actual cost of the project; (ii) repeat business for its subsidiary company M/S IDMC, Udyognagar, Gujarat, thereby reducing overhead costs, cost of designing the project etc. and other activities undertaken by IDMC as given in para 34.4; and (iii) As the project authority does not have any right / benefit of direct negotiation with the suppliers, any profit margin arising out of cost savings within the agreed cost of project. This playing by NDDB within the 'cost of project" clearly shows that it is transferring of property i.e. plant & machinery to the project authority.' With respect to challenge to the show cause notices dated 19.05.2014 & 20.10.2015 issued in....
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....arned advocate has challenged the maintainability of Statement which covers the period commencing from October 01, 2013 to March 31, 2015 (SCN dated 19.05.2014 & 20.10.2015) on the ground that the provision of law relating to the taxable services with reference to which the Statement has been issued under Section 73(1A) of the Act for the period after July 1, 2012 have been made inapplicable in view of Notification 20/2012-ST dated June 5, 2012 issued pursuant to the proviso to Section 65 of the Act as it stood prior to July 2012.The Statement has been issued under provisions of section 65 (105) of erstwhile Act alleging that the services provided by NDDB would merit classification under Works Contract Service' as defined under section 65(105)(zzzza) of the Act and therefore, taxable under sub-section (105)(zzzza) of section 65 of the erstwhile Act for the service provided during the period October, 2013 to March, 2015. Thus, it has been submitted that the Statement issued under Section 73(1A) is invalid for the reason that the condition precedent under the said provision for the issue of the same is not fulfilled. In the present case the provisions under which the earlier noti....
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....ator, fire escape staircases or elevators; or (b) construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry; or (c) construction of a new residential complex or a part thereof; or (d) completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c); or (e) turnkey projects including engineering, procurement and construction or commissioning (EPC) projects. Post to 01.07.2012 "works contract" means a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of any movable or immovable property or for carrying out any other similar activity or a part thereof in relation to such property;" 4.3 That, in both pre and post 01.07.2012, it was necessary that there should be transfer of property from the service provider besides executing....
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....ibility study. (ii) Pre-design services/project. (iii) Basic design engineering. (iv) Detailed design engineering. (v) Procurement. (vi) Construction supervision & project management. (vii) Supervision of commissioning and initial operation. (viii) Manpower planning and training. (ix) Post-operation and management. (x) Trouble shooting and technical services, including establishing systems and procedures for an existing plant. Though the above list is not exhaustive, it illustrates the wide scope and nature of the services rendered by a consulting engineer. Accordingly he emphasized that the scope of 'consulting engineering service' is very vide and cannot be restricted in the narrow sense as held by the adjudicating authority; that all the services provided by the appellant were within the scope of consulting engineering service as per the circular; that the appellant after entering into the agreement with the contractors issues a purchase order to each contractor for execution of the works specified therein; that the appellant specifically states that the Bills should be in the name of th....
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.... on the Department after adducing evidence and such exercise or burden has not been discharged by the Department; that it was not correct that the project authority was not authorised to issue any instructions to suppliers/ manufacturers/ erectors but the relevant clause provides that the Project Authority may not issue any direct instruction to the supplier / manufacturer / erectors during the course of project; Any instruction / changes required may be discussed in the site meeting where the Project Authority's representatives would be present; that since the Project Authority does not have any significant experience in undertaking the civil work, the work is entrusted to the appellant for purpose of supervision, therefore, NDDB should provide assistance / instructions to the contractor in the presence of the representative of the Project Authority that simply by virtue of this clause, the appellant cannot be regarded as a contractor, undertaking the execution of any works contract. The learned advocate has relied upon judgment of Lanco Infratech Limited vs. CC, CE and ST, Hyderabad [2015 (38) STR 709 (Tri-LB) wherein the Larger Bench relying on State of A.P and Ors V. Larsen....
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....4 (1) TMI 983, wherein the Hon'ble Tribunal, while dealing with a similar contract, held that: "10. A plain reading of the agreement particularly Clauses 5, 6, 7 and 8 of the Agreement dated 31.3.2005 which deal with the functions and obligations of the project manager in carrying out and implementing the agreement entered with M/s. Manyata Promoters Pvt. Ltd. reveals that the appellants are required to manage overall implementation of the project viz., the Software Technology Park for which the agreement had been entered between the appellant and M/s. Manyata Promoters Pvt. Ltd.. It states and reveals their obligation and function is implementation of the project and not execution of the project. On a close reading of few stipulations/clauses of the Agreement, in the said context of the recitals, we find that the appellants are required to supervise and coordinate all aspects of the development, use of reasonable means to see that the development is completed in accordance with plans and specifications, cash management of the project by providing cash flow charts and estimate charts to M/s. Manyata Promoters Pvt. Ltd., approach Municipality and any other authorities i....
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....o contractors does not show that Appellant has undertaken the job of works contract; that as per the Income Tax legislation and State specific VAT legislation, the person making the payment to the contractor is liable to deduct TDS accordingly the appellant being duly authorized by Project Manager and responsible for making payment to the contractor, have deducted the TDS while making payment to contractor in relation to execution of works contract, thus statutorily Appellant was liable to deduct TDS under income tax legislation and State specific VAT legislation. The compliance of the law in relation to deduction of tax at source under other legislations cannot be considered as a basis to suggest that Appellant is rendering works contract service to project authority. 4.8 He further refuted the findings of the impugned order-in-original that the present contract in dispute is a turnkey contract as the appellant would be able to earn on following counts: (i) Consultancy service fees (ii) Repeat business for its subsidiary IDMC (iii) Any cost saving in projects within agreed price. The earning on account of cost saving indicates that NDDB transfers the property in goods to projec....
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....illful misrepresentation or suppression is tenable as held by the Tribunal in the matters of Indian Institute of Technology (IIT) v. CST-Il 2016 (42) (STR) 406 ; CCE, Indore v. Nepa Ltd., 2013 (298) ELT 225 (Tri-Del); Hindustan Insecticides Ltd. v. CCE, Delhi-I 2017 (6) GSTL 218 (Tri-Dei.). 5. On the other hand the Ld. Authorised representative of the department has re-iterated the findings in the order in original. He has emphasized that the contract has been titled as 'Turnkey Agreement'; the appellant had appointed sub-contractors and suppliers by making agreement in his name and was making payments to them; that the sub-contractors/ suppliers worked on behalf of the appellant whose role was that of the main contractor. The appellant had awarded contract to its own subsidiary IDMC for Design, Supply and Labour job for installation, testing and commissioning of Dairy and Allied equipment for cost cutting and maximizing gains. The appellant has handled almost each and every work from start to handing over the project. Hence the services provided by the appellant were nothing but 'Works Contract' only and whole of the cost of project was liable to service tax with admissible aba....
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....ited v. Commissioner of Service Tax, Bangalore reported in 2024 (1) TMI 983, as relied upon by the appellant duly supports their contention. The relevant extract of this decision are reproduced here below:- '10. A plain reading of the agreement particularly Clauses 5, 6, 7 and 8 of the Agreement dated 31.3.2005 which deal with the functions and obligations of the project manager in carrying out and implementing the agreement entered with M/s. Manyata Promoters Pvt. Ltd. reveals that the appellants are required to manage overall implementation of the project viz., the Software Technology Park for which the agreement had been entered between the appellant and M/s. Manyata Promoters Pvt. Ltd.. It states and reveals their obligation and function is implementation of the project and not execution of the project. On a close reading of few stipulations/clauses of the Agreement, in the said context of the recitals, we find that the Appellants are required to supervise and coordinate all aspects of the development, use of reasonable means to see that the development is completed in accordance with plans and specifications, cash management of the project by providing cash flow chart....
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....n and advice of the appellant from time-to-time rendered to M/s. Manyata Promoters Pvt. Ltd., fall within the scope of advice, consultancy or technical assistance. Besides the statements of various persons recorded from time-to-time, reveal that the activities by the appellant acknowledge to be in the nature of managerial service rendered to M/s. Manyata Promoters Pvt. Ltd. Besides, we find that the appellant had collected Service Tax as per Clause 5.2.1 of the Agreement in few instances from M/s. Manyata Promoters Pvt. Ltd. but not paid the same to the department. Thus, the Project Development Management Fee collected by the Appellant squarely fall under the category of 'Management Consultancy Service' and taxable service during the period under dispute. The claim of the Appellant that it becomes taxable only with effect from 01.06.2007 under the 'Management or Business Consultancy Service', in our view is not sustainable in view of the facts and circumstances of the case discussed as above.' The moot question to be decided is whether the appellant has transferred any property in the project to the project authority. In the impugned order it has averred that various suppliers o....
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.... 7.2 In view of the above, we are of a considered view that the department has failed to prove that anything in excess of 5% charges/fee was received by the appellant from the project authority. The appellant being a government body, the balance sheets, sales tax/ vat returns filed by them cannot be doubted upon unless specifically countered by the department and on the basis of those, it is seen that no transfer of property in goods has taken place from the appellant to the Project Authority. Though the appellant has been receiving payments from the Project Authority and paying to the contractors, the same can be considered to be merely a service provided by the appellant as an 'authorised agent' of the Project Authority within the scope of their contractual obligations. No evidence has been brought on record of if any amount being received by the appellant from the project authority for payment to contractors/ suppliers was retained or appropriated by the appellant out of that. The appellant being a government body is subject to various statutory checks by the vigilance/ audits authorities and it cannot be assumed that anything not reflected in the books of account was actually a....
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.... immovable property from the appellant to the Project Authority which was an essential ingredient to classify the contract as works contract and in the absence of which contract cannot be classified to be a 'Works Contract'. We hold the impugned contract to be duly classified and taxable as 'Consulting Engineering Service' and accordingly set aside the impugned Order. All the appeals filed by party are allowed with consequential relief. 9. The department has filed appeal on the following grounds :- 'The benefit of exemption, equivalent to an amount in excess of the Service Tax calculated on a value of percentage specified in the corresponding entry in Column No (3) of Notification No. 01/2006-ST dated 01.03.2006, is available to the taxable services as described therein However in the column (3) of the Table viz. Description of taxable service, provided in the Notification No. 01/2006-ST dated 01.03.2006, there is no mention of the service category Works Contract Services', implying thereby that the benefit of exemption/abatement from payment of Service Tax under the category of Works Contract Services' is not available under the said Notification No. 01/2006-ST....