TaxTMI 
TaxTMI 
2025 (2) TMI 1488
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....ious records of the respondent was conducted and statements were also recorded. On the basis of the above, it was alleged that for the period from 2009-10 to 2013-14, the respondent was engaged in undertaking 'turnkey contracts involving both supply and erection jobs' for different clients in relation to supply, erection, commissioning and installation of tunnel kilns / furnaces. The respondent were issued separate work orders against the same project, one for the 'supply' part and the other for associated services using those supplies, which were classifiable as works contract services. It was alleged in the Show Cause Notice that the respondent had not paid appropriate Service Tax on the services rendered by them. 3.1. At the time of adjudication, the ld. adjudicating authority examined the purchase orders and was of the opinion that the purchase orders for supply of materials and that for provision of service should be read in unison for the reason that they are reciprocally dependent on each other for successful completion of the projects. He held that in each case, transfer of title of property in goods is involved in the execution of such contracts and therefore, the servi....
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....rks Contract (Composition Scheme for payment of Service Tax) Rules, 2007 as "Composition Scheme". Accordingly, the appellant paid the service tax on the gross value of the consideration under Contract II at the time of composition rate of tax prescribed under the Composition Scheme. 2.5 Against these two Contracts, various show cause notices were issued to the appellant demanding service tax from the appellant alleging that even if the appellant has entered into two separate contracts for sale of goods/supply and works contract services, the value of goods sold under Contract I would be required to be included in the gross amount charged under Contract II for the purposes of payment of service tax under the Composition Scheme. The notices also invoke extended period of limitation. 2.6 The matter was adjudicated and the demand of service tax was confirmed on gross value of Contract I & Contract II i.e. sale of goods/supply and works contract services and demanded the service tax thereon along with interest and penalties on all the three appellants were imposed. 2.7 The period involved in these appeals is June 2013 to March 2016. Aggrieved from the said ord....
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....ecame a part of Rule 3(1). 3. The explanation appended to Rule 3(1) with effect from 7-72009, categorically says in the proviso that "...nothing contained in this Explanation shall apply to a works contract where the execution under the said contract 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 ....
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.... "5. The main thrust of the arguments of the learned Solicitor General before us was that the price for the sale of CKD packs by the foreign collaborator to the respondents is not the true price. In other words, the price fixed or mentioned in the invoices was not the sole consideration 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 611-1979 & 6-31980). 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....
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....e three agreements. It is not also in dispute that in addition to the supply, the appellant had discharged VAT/CST as the case may be in respect of the supply contracts. The only question remains to be answered is whether the value of this onshore and offshore supplies by the appellants 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 ....
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....sidered as one." 8. In other words, the adjudicating authority held that the three contracts in question are essentially part of the same contract and they were signed on 12.08.2009, hence the explanation w.e.f. 07.07.2009 to Rule 3 of the Works Contract (Composition Scheme 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 ESSA....