TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 1276
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....posed by this common order. 2. Brief facts of the case as appearing in ST/42486/2015 which is taken as the lead appeal, are that the appellant, Ultra Tech Cement Ltd. [formerly M/s. Grasim Industries Ltd.], are manufacturers of cement and clinkers. On verification of the accounts of the appellant by the department, it was noticed that from 2008-09 onwards certain amount has been paid by them to one service provider by name Shri R. Saravanan, Mettur towards the services provided by the said subcontractor under the category 'Management, Maintenance or Repair Service' in the 'Fly Ash Collection System' at Mettur Thermal Power Station, Mettur Dam (MTPS). It was further noticed that they were also collecting an amount as 'operation and maintenance charges' from M/s. The India Cements Ltd, Ariyalur towards the supply of fly ash from MTPS for which they have discharged service tax on the said amount only under the category 'Business Auxiliary Service'. It appeared that they should have discharged duty on value of the entire service rendered to MTPS for 100% of the fly ash generated. It appeared that the services of operation and maintenance rendered by the service provider Shri Saravan....
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.... quantified Not quantified Penalty 1) Rs. 2,29,13,048/- under Section 78 of the Finance Act, 1994. Penalty under Section 77(1) and 77(2) of the Finance Act, 1994. Rs.10,60,743/- under Rule 15(2) of the Cenvat Credit Rules, 2004 r/w. Section 11AC of Central Excise Act, 1944. Rs. 3,84,878/- under Section 76 of the Finance Act, 1994. Rs. 7,11,115/- under Section 76 of the Finance Act, 1994. He stated that the appellant is a manufacturer of cement and clinkers and is registered with the Central Excise as well as the Service Tax Department. Since fly ash is an essential raw material for the manufacture of cement, the appellant entered into a Memorandum of Understanding (MOU) with Tamil Nadu Electricity Board (TNEB) dated 15.05.2002 for procuring 80% of the fly ash generated at the MTPS. As per the MOU, the appellant had to install a "Pressurised Dense Fly Ash Collection System - PDFACS" (also referred to as "fly ash collection system" in this order), at MTPS at their own cost. The fly ash collection system was to become the property of TNEB, and the appellant would have no right over all electrical, mechanical and civil structure and equipments installed by them at the....
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....o be set aside. v. The alleged service is not classifiable under "business support service". Hence, the demand of Service tax is unsustainable. vi. The Appellant is eligible to avail Cenvat Credit on the Service tax paid by the sub-contractor. The issue is no longer res integra and the demand for subsequent period has been dropped in Appellant's own case. vii. The extended period of limitation cannot be invoked. Thus, demand of Service tax of Rs.1,62,29,766/- and Cenvat Credit of Rs.6,79,945/- up to the period of March 2013 is barred by limitation. viii. Imposition of interest and penalty is not sustainable. He hence prayed that the impugned order may be set aside. 3.2 Shri M. Selvakumar Ld. A.R. appearing on behalf of revenue stated that, TNEB had outsourced the work of collection of fly ash generated at MTPS to the appellant. Prior to 01.07.2012, this Service is taxable under the category "Business Support Service". Post this period, this activity will qualify as Service in terms of Section 66B(44) of the Act. The consideration for this was received in kind in the form of quantity of fly ash allotted to them. Since, the consideration has ....
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....act. (2) The background was famously referred to by Lord Wilberforce as the "matrix of fact," but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man. (3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them. (4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; th....
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.... used, considered in the light of the surrounding circumstances and object of the contract. Bank of India and Anr. V. K. MohanDas and Ors [2009 5 SCC 313]. Every contract is to be considered with reference to its object and the whole of its terms and accordingly the whole context must be considered in endeavoring to collect the intention of the parties, even though the immediate object of inquiry is the meaning of an isolated clause. Bihar State Electricity Board, Patna and Ors. v. M/s. Green Rubber Industries and Ors [1990 (1) SCC 731]. (emphasis added) Further the Hon'ble Supreme Court in Great Eastern Shipping Company Ltd. Vs State Of Karnataka [2020 (32) G.S.T.L. 3 (S.C.)] held; Interpretation of contract 13. It is a settled principle in law that a contract is interpreted according to its purpose. The purpose of a contract is the interests, objectives, values, policy that the contract is designed to actualize. It comprises the joint intent of the parties. Every such contract expresses the autonomy of the contractual parties' private will. It creates reasonable, legally protected expectations between the parties and reliance on its results. Cons....
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.... the date of commissioning of the complete system. ***** ***** ***** 12. Manpower should be provided round the clock for attending the problems in the systems. Trained person shall be deployed for operating PLC in the control room. Maintenance/repairs of the system installed will be company cost and responsibility. The Area utilised by the company should be properly maintained day to day in neat and tidy condition. Otherwise the same will be cleaned by TNEB by engaging private agency and the cost will be recovered from the advance payment. ***** ***** ***** 17. Company should take group insurance policy for the workmen intended for this work under Workman Compensation Act. 18. Company will be permitted to install fly ash collection system at their cost. The proposed system should not interfere with the other routine activities of the plant. In the existing system, only transmitters with inlet connecting pipes (airlines) can be utilised by the allottee company to evacuate fly ash. In case any modification is required in operation of the transmitters it can be done after getting prior approval of TNEB. Till the commissioning of the propose....
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....t in their present action, the same would stare at the petitioners as to how the petitioners alone were selected for clearance of the fly ash when there are number of persons equally placed as that of the petitioners are standing in queue for clearing the fly ash. ***** ***** ***** 28. In the facts of the present case, the one and only public interest is prevention of environment hazard, which is likely to be caused due to the short collection by the petitioner. It is the specific case of the respondent by giving data that consistently, there is short collection of fly ash by the petitioner, which has been intimated to them periodically and the respondent has made several arrangements to clear the uncleared fly ash by themselves. Further, the respondent has also offered reimbursement of the operational maintenance cost, which the petitioner loses by virtue of reduction of the percentage of collection under the impugned order. In addition to that, materials were made available that the petitioner is making profit out of the collection of fly ash by selling to others in higher rate. Incidentally, it must also be noticed that the respondent is not collecting any amou....
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....ompany incorporated under the Indian Companies Act, 1913 and having its Registered Office at 'Dhun Building', 827, Anna Salai, Chennai represented herein by its Senior President (hereinafter called CEMENTS LIMITED", which term shall mean and include its successors and assigns) WHEREAS M/S.GRASIM INDUSTRIES LIMITED had been permitted by an order dated 15.05.2002 for installation of Pressurised Dense Fly Ash Collection System (PDFACS) in Unit - I of Mettur Thermal Power Station and permitted to remove 80% of the fly ash generated therein; AND WHEREAS, as the demand for the fly ash by needy industries is more, TNEB is compelled to honour the requirement of all the needy entrepreneurs in a judicious manner, the allotment already issued to M/s. GRASIM INDUSTRIES LIMITED was revised and reduced to 40% from 80% and M/s. THE INDIA CEMENTS LIMITED was allotted 25% with TNEB retaining the balance of 15% with themselves and a MoU was entered into with M/s. THE INDIA CEMENTS LIMITED AND WHEREAS on a challenge of the said order by M/s. GRASIM INDUSTRIES LIMITED before the High Court, the High Court in its order dated 19.04.2007 in WP No. 23422/2006 and etc., (....
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.... public utility company could also retain 20% of the fly ash for allotting it to other Industries. The issue later came to be litigated before the Hon'ble Madras High Court and a sharing formula, as stated at para 8 above, was devised. Since the appellant had set up the fly ash collection system, they were allowed to re-coup a part of the overhead costs involved from the other Cement Co. sharing the fly ash, at the rate of Rs 206/- per M.T.. 10. It is submitted by revenue that this charge of Rs 206/- per M.T., collected by the appellant from India Cements towards overhead costs is the rate to be uniformly applied to the entire quantity of the fly ash generated at MTPS to arrive at the cost of operation and maintenance of Fly ash Collection system, including for the quantity of 20% of the fly ash retained by TNEB. 11. As stated above, the MOU has to be understood to reflect the joint intent and expectations between the parties. The explicit terms of a contract denotes the intention of the parties. Nothing can be added to the understanding of the contract unless it is shown that contrive and camouflage was adopted in drafting the MOU, to conceal the actual intention of the part....
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....eived by the service provider as "consideration" from the service recipient for the service provided. Implicit in this legislative architecture is the concept that any consideration whether monetary or otherwise should have flown or should flow from the service recipient to the service provider and should accrue to the benefit of the later and that the value of "free supplies" by a construction services recipient, for incorporation in the construction would not constitute a nonmonetary consideration to the service provider nor form part of the gross amount charge for the services provided. 13. Revenue states that contractor Shri R. Saravanan's work involves managing the fly ash collection system at MTPS, which serves only the Thermal Power Station, not the appellant unit. Therefore, any credit of Service Tax paid to the sub-contractor in relation to fly ash handling system will be available only to the thermal power plant subject to the fulfilment of conditions under Rule 2(1) of the CCR. Moreover, since the thermal power station does not pay Excise duty on cleared fly ash, input service credit is not available to the plant nor to the appellant. This view does not find favou....