TMI Blog2023 (6) TMI 1308X X X X Extracts X X X X X X X X Extracts X X X X ..... nces, when there is a contract of supply of goods as well as services, the same was termed as works contract and the same was taxable w.e.f. 01.06.2007 under the category of works contract services as held by the Hon ble Apex Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT ]. Therefore, prior to 01.06.2007 the nature of activity undertaken by the appellant is correctly classifiable under works contract services and for the period prior to 01.06.2007 covered by the decision of Larsen Toubro Ltd. (supra) and not liable to pay Service Tax at all. W.e.f. 01.06.2007, similar issue has come up before this Tribunal in the case of Xerox India Ltd. [ 2018 (3) TMI 1006 - CESTAT CHANDIGARH] wherein this Tribunal has held that if service has been provided along with material and the value of material supplied cannot be vivisected, in that circumstances, appropriate classification of the service shall be works contract service and same is not taxable prior to 01.06.2007. Further it was held by this Tribunal that for the period post 01.06.2007, the maintenance and repairs and XGS services are cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax (Determination of Value) Rules, 2006 and classification of the services therefore the extended period of limitation is not invocable in the facts of the present case. Accordingly, the said issue is also answered in favour of the appellant. Whether penalty can be imposed on the appellant or not? - HELD THAT:- In the facts and circumstances of the present case, no penalty is imposable on the appellant. Accordingly, same is answered in favour of the appellant. All the issues have been answered in favour of the appellant - Appeal allowed. - HON BLE SHRI ASHOK JINDAL, MEMBER (JUDICIAL) AND HON BLE SHRI K. ANPAZHAKAN, MEMBER(TECHNICAL) For the Appellant : Shri B.L.Narshimanh, Shri Rahul Tangri Ms.Udita Saraf, all Advocates. For the Respondent : Shri K.Chowdhury, Authorized Representative ORDER Per : ASHOK JINDAL : The Appellant has filed Applications for bringing additional grounds on record as after filing the Appeals there were judicial pronouncements which are very necessary to decide the issue in hand. Heard the Ld.Counsel for the Appellant, considered the fact that additional ground raised by the Appellant on the basis of judicial pronou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to March 2014, the demand is confirmed holding that the services as works contract, but demand is computed by disregarding the actual value of goods and VAT payment made by the appellant holding that Rule 2A(i) of the Service Tax Valuation Rules is not applicable to the present case, therefore, the appellant is liable to pay Service Tax by applying Rule 2A(ii) of the Service Tax Valuation Rules i.e. 70% of the gross consideration received by the appellant. Aggrieved from the said orders, the appellant is before us. 5. The Ld.Counsel appearing on behalf of the appellant submits that the Service Tax is not leviable as composite contract for maintenance and repairs of equipment which entails supply of goods and services for the period up to 01.07.2012. To support this contention he relied on the decision in the case of CCE, Delhi v. Xerox India Ltd. [2019 (20) G.S.T.L. 96(Tri.-Chan.) and in the case of SEW Infracture Ltd. v. CCE, Raipur [Final Order No.50640/2023 dated 02.05.2023]. 6. In alternate he submits that value of materials supplied during repairs and maintenance service is deductible from the total contract value to arrive at assessable value liable for levy of Service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S.C.)]. Therefore, prior to 01.06.2007 the nature of activity undertaken by the appellant is correctly classifiable under works contract services and for the period prior to 01.06.2007 covered by the decision of Larsen Toubro Ltd. (supra) and not liable to pay Service Tax at all. W.e.f. 01.06.2007, we find that similar issue has come up before this Tribunal in the case of Xerox India Ltd. (supra), wherein this Tribunal has held that if service has been provided along with material and the value of material supplied cannot be vivisected, in that circumstances, appropriate classification of the service shall be works contract service and same is not taxable prior to 01.06.2007. Further it was held by this Tribunal that for the period post 01.06.2007, the maintenance and repairs and XGS services are classifiable under works contract service. Whether services under works contract service is taxable or not this Tribunal has observed has under:- We find that for the first time Section 65(105)(zzzza) set-out to tax the service as Works Contract service for levy of service tax on the works executed along with the material and the said condition is enumerated hereunder :- 11. By t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Hon ble Apex Court further examined which service is liable to be taxed under Section 65(105)(zzzza) of the Act and observed as under:- 24. A close look at the Finance Act, 1994 would show that the five taxable services referred to in the charging Section 65(105) would refer only to service contracts simpliciter and not to composite works contracts. This is clear from the very language of Section 65(105) which defines taxable service as any service provided . All the services referred to in the said sub-clauses are service contracts simpliciter without any other element in them, such as for example, a service contract which is a commissioning and installation, or erection, commissioning and installation contract. Further, under Section 67, as has been pointed out above, the value of a taxable service is the gross amount charged by the service provider for such service rendered by him. This would unmistakably show that what is referred to in the charging provision is the taxation of service contracts simpliciter and not composite works contracts, such as are contained on the facts of the present cases. It will also be noticed that no attempt to remove the non-service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1994, during the period. As the activities undertaken by M/s. Xerox under various contracts in question, is in nature of Works Contract i.e. the service has been provided along with material and value of the material cannot be vivisected and therefore, prior to 1-6-2007 M/s. Xerox is not liable to pay service [tax] at all. For the period post 1-6-2007, as M/s. Xerox is providing services in question along with material but the same is not covered under Works Contract as per Section 65(105)(zzzza) of the Finance Act, 1994. Therefore, M/s. Xerox is not liable to pay service tax under the caterory of Maintenance and Repair service/ Business Support Service / Business Auxiliary Service . 12. Further in the case of SEW Infrastructure Ltd. (supra) this Tribunal has observed as under:- 20. What transpires from a perusal of Annexure A is that the work order is a composite contract comprising services as well as goods. This would be clear from serial no. 6 which mentions Earth work in excavation for levelling and grading using borrowed good earth . It specifies that borrowed good earth has to be arranged by the contractor at its own cost. There can be no manner of doubt that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be noticed that no attempt to remove the non-service elements from the composite works contracts has been made by any of the aforesaid Sections by deducting from the gross value of the works contract the value of property in goods transferred in the execution of a works contract. 25. In fact, by way of contrast, Section 67 post amendment (by the Finance Act, 2006) for the first time prescribes, in cases like the present, where the provision of service is for a consideration which is not ascertainable, to be the amount as may be determined in the prescribed manner. 26. We have already seen that Rule 2(A) framed pursuant to this power has followed the second Gannon Dunkerley case in segregating the service 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 Gann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such services provided or to be provided by him and not the value of the goods provided by customers of service provider and the service tax cannot be charged on the value of the goods used in the contract. 43. We need only state that in view of our finding that the said Finance Act lays down no charge or machinery to levy and assess service tax on indivisible composite works contracts, such argument must fail. This is also for the simple reason that there is no subterfuge in entering into composite works contracts containing elements both of transfer of property in goods as well as labour and services. 23. The view expressed by the Supreme Court in the aforesaid decision was reiterated by the Supreme Court in Total Environment Building Systems and the relevant paragraphs of the judgment are reproduced below : 20. Service tax was introduced in India vide the Finance Act, 1994. Service tax is legislated by Parliament under the residuary entry i.e. Entry 97 of List I of the Seventh Schedule of the Constitution of India read with Article 248 of the Constitution. The service tax provisions have the following basic scheme: (i) Section 65 of the Act provides for taxable s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Works contract inserted for the first time by virtue of Section 65(105)(zzzza) under the Finance Act, 2007 assumes significance and has to be applied w.e.f. 1st June, 2007. Thus, on and from the enforcement of the amendment in the Financial Year 2007, i.e. 1st June, 2007 the tax on the service component of works contract became leviable. Therefore, till then it was not so leviable as there was no concept of works contract under the said Act. 24. Recognizing this aspect of the matter in Larsen and Toubro Ltd. (supra), this Court held that Service Tax on works contract was not leviable, meaning thereby, that such tax on the service component of works contract as defined above did not attract Service Tax prior to the amendment. 26. Therefore, reliance placed by the assessees in the present case on the aforesaid judgments is just and proper. On the other hand, the contention of Ms. Diwan, Learned ASG to the effect that even prior to the aforesaid amendment being made to the Finance Act, 1994 service tax on works contract was leviable is not correct. It was being levied on purely service contract and not on service element of works contract as there was no definition of a w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act, referred to in clause (h) of section 66E of the Act, shall be determined in the following manner, namely :- (i) Value of service portion in the execution of a works contract shall be equivalent to the gross amount charged for the works contract less the value of property in goods [or in goods and land or undivided share of land, as the case may be] transferred in the execution of the said works contract. Explanation. - For the purposes of this clause,- (a) gross amount charged for the works contract shall not include value added tax or sales tax, as the case may be, paid or payable, if any, on transfer of property in goods involved in the execution of the said works contract; (b) value of works contract service shall include, - (i) labour charges for execution of the works; (ii) amount paid to a sub-contractor for labour and services; (iii) charges for planning, designing and architect s fees; (iv) charges for obtaining on hire or otherwise, machinery and tools used for the execution of the works contract; (v) cost of consumables such as water, electricity, fuel used in the execution of the works contract; (vi) cost of establishment of the contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excluded from the total value of works contract service and on remaining part of the value, the Service Tax is payable. Admittedly, in the case in hand, the service has been classified under works contract service and the value of goods supplied is ascertainable on which they have paid VAT, therefore, the same has to be excluded from the value of works contract to ascertain the value of taxable service provided by the appellant. Rule 2A(c) of the Valuation Rules only applies in case the value of goods supplied was not determined under the Rule 2A of the Rules. But, in the case in hand, value of material supplied has already been ascertained and VAT has been paid thereon, in that circumstances, we hold that for the period post 01.07.2002, the taxable value is to be determined in terms of Rule 2A(i)(c) of the Valuation Rules, 2006, therefore in view of the above, this issue is also answered in favour of the Appellant. (c) Whether in the facts and circumstances of the case extended period of limitation is invocable or not? 16. As whole case is interpretation of the provisions of Service Tax (Determination of Value) Rules, 2006 and classification of the services therefore we ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
