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2021 (11) TMI 18 - AT - Service TaxTaxability - scope of the term Railways Works contract in relation to Mumbai Railway Vikas Corporation Ltd (MRVC) - reverse charge mechanism - services provided to Appellants by the service providers located outside India & not having office in India - supply of goods and supply of service separately - contract of supply is a divisible contract or not - whether during the period of dispute, i. e. 2005 to 2010, whether in contract for supply of goods and services incidental to the supply of goods, the services portion can be segregated and subjected to levy of Service Tax? HELD THAT:- The contract is not divisible as urged by the learned authorized representative. The contract price includes cost of all items included in the scope of work, technical specifications, specific requirements, drawings and/ or under any other heads of Contract Documents and to complete the subject work on turnkey basis, irrespective of whether all the items for Engineering, Supply and Erection are categorically listed out/ brought out elsewhere or not. The contract price includes cost of all works which are deemed to be performed, executed and supplied by the Supplier as stipulated in the Contract and assigned to various available heads and categories in the price schedule referred to by the authorized representative. A combined reading of clauses contained in the agreement/contract and along with the definitions and explanations given as per the dictionaries, it cannot be agreed upon with the submissions made by the authorized representative that the contract, under consideration is a “divisible’ contract, which could have been vivisected to charge the service tax in respect of certain portion attributable to supervision undertaken by the foreign service provider as per the contract. Further the findings recorded by the Commissioner cannot be agreed upon, whereby he holds that the contract was not a turnkey contract incorporating all the activities specified in the contract as one complete whole. In case of SENTINEL ROLLING SHUTTERS & ENGINEERING COMPANY PVT. LTD. VERSUS THE COMMISSIONER OF SALES TAX [1978 (9) TMI 157 - SUPREME COURT] wherein the Hon’ble Supreme Court was considering whether it was possible to break-up one contract into two segments - one for sale of goods and the others for providing services. The definition of 'Works Contract' do not state that the contracts, of railway do not fall within the scope of work contract service but state that the work contract services, in respect of railways, are excluded from taxable category as defined by the said section. The work contract has been defined by the explanation, and any contract which satisfies to the requirements specified therein will fall under the category of work contract. However if the said contract falls within the exclusion category the same cannot be taxed under the said taxable category. Since the work contracts in respect of railways have been excluded from the definition of taxable service the same cannot be taxed under this category. The appellant being public sector under taking of Ministry of Railway, and the project undertaken is for Railways, cannot be subject to tax in this category even after 1st June 2007. Appeal allowed - decided in favor of appellant.
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