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2013 (12) TMI 796 - CESTAT AHMEDABADDemand of service tax - Two contracts was for supply of indigenous equipment and materials and the other one for the Construction/ Erection/ Installation of plant - Revenue contends that there was artificial bifurcation of contracts and contracts should be treated as one - Revenue also contends that explanation to Rule 3(1) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, substituted under Notification No. 23/2009-ST dated 07.7.2009, is not applicable to the applicant's case - Whether two contracts dated 24.08.2007, executed by the appellant with service recipients can be considered as separate contracts or as one contract - Held that:- 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 - It is clear from the Circular issued by CBEC that where execution of works contract has commenced prior to 07.7.2009, in those cases gross amount, for the purpose of 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, both the contracts dated 24.08.2007 for Supply of equipments and Construction of works has to be treated as distinct and separate contracts and value of supply contract cannot be added to the value of the construction contract for the purpose of service tax liability - Decided in favour of assessee.
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