TMI Blog2013 (12) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of service tax, will not include the free of cost supply by the service recipient. In view of the clause of the supply contract, the findings of the adjudicating authority that ownership of the Balance of Plant and items stands transferred only at the time of completion of work, is not correct. In the case of imported equipments as well as the Balance of Plant equipment, the ownership/ title lies with the service recipient when the same are received at site. Accordingly, it has to be held that after receipt of balance equipment, the title/ ownership of the same is transferred to the service recipient. Accordingly, adjudicating authority cannot go beyond the CBEC Circular No. 150/1/2012-ST dated 08.2.2012 wherein it has been clarified that for the works contract executed before 07.7.2009, free of cost supplies are not required to be added to the gross amount, for the purpose of payment of service tax. There is no evidence on record to convey that both, the supply contract and the construction contract were artificially bifurcated after introduction of explanation to Rule 3(1) of Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. Therefore, bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant under the supply contract. On the other hand, appellant was required to provide services of erection, installation and commissioning of the facility under the construction contract, in which all the imported material supplied by the service recipient along with the indigenous material was required to be used for making the facility functional. He emphasized that the balance of plant procured by the appellants from different vendors was supplied to service recipient and as per the clause 15 of the Supply Contract the title and risk for the balance of plant in each item is transferred to the owner/ recipient of the services by the supplier of that item of balance of plant at the time of receipt at site by suitable endorsement of documents. It was also emphasized that clause 18 of the supply contract deals with defects liability with respect to the balance of plant. It was argued by the learned advocate that there is a separate corresponding defect liability clause under clause 34 of construction contract but that defect liability is only for the defects or damages to the facility provided by the appellant. Shri V.K. Jain made us go through the definition of unit and faci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Shri K. Sivakumar, learned A.R. appearing on behalf of the Revenue argued that both the contracts are dated 24.08.2007 and have been made operational simultaneously in order to make facility for the service recipient. He thus argued that both these contracts have to be read as one in view of the judgment dated 28.02.2010 given by ITAT in the case of appellant itself wherein it was held that such contracts are required to be considered as one composite contract only. 6. We have given our anxious thoughts to the arguments made by both sides and also perused the records. The issue required to be decided in these proceedings is whether two contracts dated 24.08.2007, executed by the appellant with service recipients can be considered as separate contracts or as one contract. It has been argued by the appellant that both the contracts are independent and cannot be considered as one for the purpose of determining taxable value of the service provided. It was further argued that even if two contracts are treated as one, still appellants case will not be covered under the Explanation added with effect from 07.7.2009 in Rule 3 (1) of the Work Contract (Composition Scheme for Payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the definition clause means any defect, imperfection, deficiency or other fault in the facility or part thereof arising from or in relation the execution of work. 8. From the above clauses of the contracts, it is clear that there are separate defects liability clause under the contracts separately provided for the defects in balance of plant and the defects that can creep in the working of the facility by the service provider for the service recipient. Therefore, it is not correct to hold that defects liability clause of the construction contract also make provisions for maintenance and repair of balance of plant. 9. The arguments made by the appellant, that the explanation added to Rule 3(1) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 is applicable only for those contracts which are entered after 07.7.2009, has got some force. The clarification issued by CBEC under Circular No. 150/1/2012-ST dated 08.02.2012, in Para 3, has clarified as follows:- 3. The explanation appended to Rule 3(1) with effect from 07-7-2009, categorically says in the proviso that nothing contained in this Explanation shall apply to a works contract wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally bifurcated after introduction of explanation to Rule 3(1) of Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. 10. The Hon ble Supreme Court in the case of UOI vs. Mahindra and Mahindra Limited [1995 (76) ELT 481 (SC)] in Para 5 has held as follows:- 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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