TMI Blog2019 (9) TMI 1107X X X X Extracts X X X X X X X X Extracts X X X X ..... we find that the appellant has a strong case on merits, we are not going into the issue of limitation. Appeal allowed - decided in favor of appellant. - ST/422/2009-DB - ST/422/2009-DB - Dated:- 25-9-2019 - MR. S.S GARG, JUDICIAL MEMBER AND MR. P. ANJANI KUMAR, TECHNICAL MEMBER For the Appellant : MR. M.S. NAGARAJA, ADVOCATE For the Respondent : MR. MADHUPSHARAN, ASST. COMMISSIONER (AR) ORDER The appellant is engaged in the execution of Works Contract with M/s Power Grid Corporation of India Ltd. for setting up of 400/220 KV Sub-Stations. Department issued a SCN dated 25.01.2008 to the appellant demanding Service Tax classifying the work undertaken by them under Site Formation and Clearance, Excavation, Earthmoving and Demolition Service falling under Section 65(zzza) of the Finance Act, 1994 for the period May 2006 to September 2007. The SCN was adjudicated vide Order dated 19.02.2009 wherein Service Tax of ₹ 57,87,451/- was confirmed along with interest and penalties. Hence, this appeal. 2. Learned Counsel for the appellants submits tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Heard both sides and perused the records of the case. 5. Ongoing through the contract, we find that Article 2.0 stipulates as follows: Contract Documents: The contractor shall carryout and perform the completion of the subject work of Site levelling at Cochin 400/220 KV sub-station including the connected items of work and service strictly in accordance with the terms and conditions stipulated herein and the following documents attached herewith and hereafter referred to as contract documents: a) Tender submitted by the contractor containing BOQ, Tender drawings, Special condition of contract, clarifications issued for the tender documents, POWERGRID GCC for Civil works, standard Technical specifications and Standard field quality plan. b) Letter of Award No. SRTS-II/C M/WC-307/LOA-324/2006/345/184Q dated 27.03.2006 along with bill of quantities issued by POWERGRID to the contractor, which had been unequivocally accepted by the contractor. All the above contract documents shall form as integral part of this agreement. 5.1. Ongoing through the Letter of Award and Bill of Quantities, it is abundan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read as follows :- Valuation of taxable services for charging Service tax. - (1) Subject to the provisions of this Chapter, service tax chargeable on any taxable service with reference to its value shall, - (i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money, with the addition of service tax charged, is equivalent to the consideration; (iii) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner. 16 . At this stage, it is important to note the scheme of taxation under our Constitution. In the lists contained in the 7th Schedule to the Constitution, taxation entries are to be found only in lists I and II. This is for the reason that in our Constitutional scheme, taxation powers of the Centre and the States are mutually ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in Article 246(1) means that taxing entries must be construed so as to maintain exclusivity. Although generally speaking, a liberal interpretation must be given to taxing entries, this would not bring within its purview a tax on subject-matter which a fair reading of the entry does not cover. If in substance, the statute is not referable to a field given to the State, the court will not by any principle of interpretation allow a statute not covered by it to intrude upon this field. (at paras 88 and 89) 17 . We find that the assessees are correct in their submission that a works contract is a separate species of contract distinct from contracts for services simpliciter recognized by the world of commerce and law as such, and has to be taxed separately as such. In Gannon Dunkerley, 1959 SCR 379, this Court recognized works contracts as a separate species of contract as follows :- To avoid misconception, it must be stated that the above conclusion has reference to works contracts, which are entire and indivisible, as the contracts of the respondents have been held by the learned Judges of the Court below to be. The several forms which such ki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce component of a works contract from the goods component. It begins by working downwards from the gross amount charged for the entire works contract and minusing from it the value of the property in goods transferred in the execution of such works contract. This is done by adopting the value that is adopted for the purpose of payment of VAT. The rule goes on to say that the service component of the works contract is to include the eight elements laid down in the second Gannon Dunkerley case including apportionment of the cost of establishment, other expenses and profit earned by the service provider as is relatable only to supply of labour and services. And, where value is not determined having regard to the aforesaid parameters, (namely, in those cases where the books of account of the contractor are not looked into for any reason) by determining in different works contracts how much shall be the percentage of the total amount charged for the works contract, attributable to the service element in such contracts. It is this scheme and this scheme alone which complies with constitutional requirements in that it bifurcates a composite indivisible works contract and takes care to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained for the purpose of calculating the service tax payable thereupon. 24 . In this hue, the expression such occurring in Section 67 of the Act assumes importance. In other words, valuation of taxable services for charging service tax, the authorities are to find what is the gross amount charged for providing such taxable services. As a fortiori, any other amount which is calculated not for providing such taxable service cannot a part of that valuation as that amount is not calculated for providing such taxable service . That according to us is the plain meaning which is to be attached to Section 67 (unamended, i.e., prior to May 1, 2006) or after its amendment, with effect from, May 1, 2006. Once this interpretation is to be given to Section 67, it hardly needs to be emphasised that Rule 5 of the Rules went much beyond the mandate of Section 67. We, therefore, find that High Court was right in interpreting Sections 66 and 67 to say that in the valuation of taxable service, the value of taxable service shall be the gross amount charged by the service provider for such service and the valuation of tax service cannot be anything more or less than the consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prospective in nature. On this aspect of the matter, we may usefully refer to the Constitution Bench judgment in the case of Commissioner of Income Tax (Central)-I, New Delhi v. Vatika Township Private Limited [(2015) 1 SCC 1] wherein it was observed as under : 27. A legislation, be it a statutory Act or a statutory rule or a statutory notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not just a series of statements, such as one finds in a work of fiction/non-fiction or even in a judgment of a court of law. There is a technique required to draft a legislation as well as to understand a legislation. Former technique is known as legislative drafting and latter one is to be found in the various principles of interpretation of statutes . Vis-a-vis ordinary prose, a legislation differs in its provenance, layout and features as also in the implication as to its meaning that arise by presumptions as to the intent of the maker thereof. 28. Of the various rules guiding ..... X X X X Extracts X X X X X X X X Extracts X X X X
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