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2010 (5) TMI 46 - AT - Service TaxTurnkey Projects - Composite Contracts - Consulting Engineering Services - The moot question was "whether turnkey contract can be vivisected? - Whether service by way of "advice, consultancy or technical assistance" in the case of turnkey contract will attract service tax will have to be determined on the facts of the case? Held that: An entry incorporated to the Statute book w.e.f. 1.6.2007 (service tax on works contract) has nothing to do with the severance of the contract to segregate goods and services involved in turnkey contracts. Leviability of service tax on different elements of services certainly depends on the facts and circumstances of each case and classification of the respective services. The Division Bench while dealing with the appeals shall have advantage to look into each case on its own factual matrix and legal back ground as well as respective pleadings. - The plea that because decision of Daelim's case has been followed in the past by different Benches of the Tribunal, that holds the field does not get sanction of law when different aspects of a commercial transaction are liable to tax under different legislations according to the fields of taxation assigned to States and Government of India. - Severability of composite and turnkey contract permitted by Constitution by Article 366 (29-A)(b) cannot be said to have been for the mere purpose of levy of sales tax. Severance discerns service elements of the contracts and provides measure of levy to impose service tax on taxable services A contract whether composite or Turnkey may involve an activity or cluster of activities in the nature of services and such services may be provided in the course of execution of such contracts while incorporating goods into the contract concerned. Such discernible services may be advice, consultancy or technical assistance and depending upon the nature of the activity, they may be classifiable under appropriate category of taxable service under section 65 A of the Finance Act, 1994. When Article 366(29-A)(b) to the Constitution has made indivisible contracts of the aforesaid nature divisible to find out goods component and value thereof, it can be unambiguously be stated that the remnant part of the contract may be attributable to the scope of service tax under the Provisions of Finance Act, 1994.
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