TMI Blog2010 (12) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... ty therein, since the provisions of law has come into force with effect from 1.6.2007 – Appeal was allowed - ST/103/08 - Final Order No. 1570/2010 - Dated:- 29-12-2010 - Mr. M.V.Ravindran, Mr. P.Karthikeyan Mr. G. Shivadass, Advocate for the appellant. Mr. P.R.V. Ramanan, Special Counsel for the Revenue. Per M.V.Ravindran This appeal is directed against the Order-in-original No.95/2007 Commr. Dt. 30/11/2007. 2. The relevant facts that arise for consideration are that the appellants herein are the service provider and are having registration as LTU. The appellants herein entered into five contracts with M/s. Delhi Metro Rail Corporation (DMRC for short) viz. 3E 11, 3E 14, 3E 42, 3E 43 3E 46. Contract 3E 11 is for design, manufacture, supply, installation, testing and commissioning of Electrical, Hydraulic Fire systems for underground Barakhamba Road station on Barakhamba Road-Connaught Place-Dwarka Section of DMR Project. Contract 3E 14 is for design, manufacture, supply, installation, testing and commissioning of Electrical, Hydraulic Fire systems for under ground Mandi House Station and associated Tunnel in section S-4 of East-West Corridor of DMR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amount already paid by them and for also imposition of penalty and demand of interest. Appellants contested the show-cause notice contending that all the contracts in question are turnkey contracts and therefore not liable for service tax prior to 01/06/2007; it was also contended that in terms of above contracts they had undertaken activity of supply, fabrication, installation, testing and commissioning of electrical, hydraulic and fire detection and suppression system in a composite manner. The Adjudicating Authority, after granting an opportunity of personal hearing and after considering oral and written submissions made before him, did not agree with the contentions raised by the appellants and came to the conclusion that the appellants are liable to pay service tax on the taxable services provided to DMRC under the category of Commissioning and Installation services and coming to such conclusion passed the following order:- ORDER i) I hold that M/s. ABB are liable to pay service tax on the taxable services provided to M/s. DMRC supply of equipments designs, manufacture, supply installation, testing and commissioning of electrical hydraulic and fire systems for undergro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax on civil items used therein. It is his submission that the statement was placed on record by the appellants during the time of hearing which indicated that deduction of works contract tax and income tax from the running account bills raised by the appellants. As an example, he would take us through the Running Account Bill No.RA6 and RA7 dated February, 2006 and March, 2006 and submitted that on the said gross value of the bills, DMRC have deducted an amount calculated @ 2% as works contract tax and income tax @ 2.244%. It is his submission that this calculation was brought to the notice of the Adjudicating Authority and tallied with the calculation sheet which was given in the show-cause notice indicated that the said contract was registered as a works contract. It is also his submission that the appellants had enclosed Delhi VAT TDS certificates issued by DMRC to the appellants validating the payment of TDS payments towards works contract tax as per the provisions of Delhi Value Added Tax Act, 2004, which is annexed at page 2156 to 2166 of the paper book. It is his submission that all the contracts are identical but for different areas; they are indivisible contracts; no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract in sub-clause (a) or (d) and will be leviable for service tax from 01/06/2007. He would rely upon the Circular No.B1/16/2007-TRU dt. 22/5/2007 and Circular No.98/1/2008-ST dt. 4/1/2008 for the clarification that classification of the services would depend upon the nature and substance of the transaction and the single composite service cannot be vivisected for the purpose of charging service tax. It is his submission that the Tribunal has been consistently holding that works contract is a new service taxable only w.e.f. 01/06/2007 for which he relies upon the following case laws:- a. Diebold Systems Pvt. Ltd. Vs Commissioner of Service Tax, Chennai 2008-TIOL-489-CESTAT-MAD b. Air Liquide Engg India Pvt. Ltd. Vs CCE, Hyderabad 2008 (9) STR 486 c. Daelim Industrial Co. Ltd. v. CCE, Vadodara 2006 (3) STR 124 (Tri-Del) d. Jyoti Limited Vs CCE, Vadodara 2008 (9) STR 373 e. CCE, Bangalore v. Murali Sesh Enviro Engineers, Bangalore 2008- TIOL-714-CEST AT-BANG f. Blue Star Ltd. v. CCE, Hyderabad-II 2008-TIOL-342- CESTAT-BANG. 4.2. It is also his submission that whether an activity involving of execution of works contract is classifiable under works contract cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellants are taxable under the category of Erection, installation and commissioning services. It is his submission that the particulars schedule, forming part of the contract provides for the general description of the work, total units to be supplied, unit rate for erection, installation and commissioning. It is his submission that the particulars schedule contained itemwise, equipmentwise charges for erection, installation and commissioning of all and all of them involved supply, fabrications, installation, testing and commissioning of electrical and hydraulic and fire detection and suppression system in a composite manner. It is his submission that the appellants had placed reliance in the decision of the Tribunal in the case of Daelim Industrial Co. Ltd. (supra) wherein it has been held that the works contract cannot be vivisected and the part of supplied material is not subjected to service tax and he submitted that the services are subject to service tax is incorrect law as the said decision was revisited by the Larger Bench in the case of CCE, Raipur Vs. BSBK Pvt. Ltd. [2010(253) ELT 522 (Tri. LB)], wherein the Larger Bench has answered the reference for the term th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellants before commissioning the plant as a whole. He would submit that the Boards circular No.59/8/2003-ST dt. 20/6/2003 would cover the issue wherein the Board has said that in the case of commissioning and installation it has been pointed out that in case of turnkey project, the contract may be indivisible and no separate value could be assigned to commissioning or installation of goods, on doubts raised as to what would be the value of taxable service. It is submitted that it has been provided in law that service tax is leviable on erection and commissioning charges only and not on the material and goods supplied; however, it is upto the service provider to show the break-up of commissioning or installation charges; in case service provider shows consolidated charges, service tax would be leviable on such consolidated amount. He would also rely upon the circular No.62/11/2003 dt. 21/8/2003 for this proposition and also on the circular No.80/10/2004-ST dt. 17/9/2004 to emphasize that even if there is a composite contract for erection, commissioning and installation, erection charges should be taxed as part of the category service rendered under erection, commissioning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue after DGCEI caused certain enquiries and conducted detailed investigation, which was not disclosed to the Department earlier. In view of this, it is the submission that the Order-in-Original be upheld without any interference. 6. We have considered the submissions made at length by both sides and perused the records. 7. The issue involved in this case is whether 5 contracts entered by the appellants with DMRC for supply of equipments, designs, manufacture, supply, installation, testing and commissioning of electrical, hydraulic and fire systems for underground Barakhamba Road Station at New Delhi would fall under the category of taxable services as per Section 65(105) of the Finance Act, 1994 under the heading erection, installation and commissioning agency. It is undisputed that the appellants had Service Tax registration for erection, commissioning and installation services and have been paying service tax on the activities of tower engineering consultancy or erection, installation and commissioning jobs. The Adjudicating Authority has proceeded on the premise that the appellants are providing the services of erection, installation and commissioning of the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by them could not be works contract on the findings that the contracts included supply element and also services element of erection, commissioning and installation. In our considered view, this could be an incorrect appreciation of the evidences which were produced before us. It is seen from the records and undisputed that the contracts entered by the appellants with DMRC were registered with the Sales Tax authorities for billing under DVAT Act and VAT liability has been deducted from the payments made to the appellants and discharged to the authorities. It is also on record that the tax is deducted on at source from the bills raised by the appellants as per the provisions of the law, on execution of said projects. It is seen from the records that the appellants are not raising a lumpsum bill for the completion of the project, but are raising Running Account Bills, for the work completed and it included the element of supply of the materials which was either manufactured by the appellants or procured from outside. The discharge of VAT and deduction of TDS by the DMRC by taking the amount from the Running Account Bills of the appellants would definitely indicate that the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ); or (e) turnkey projects including engineering, procurement and construction or commissioning (EPC) projects 17. It can be noticed from the above reproduced definition that turnkey projects including engineering and procurement and construction or commissioning projects were considered as works contract. From the combined reading of the three contracts entered by M/s Power Grid Corporation for the purpose of execution of turnkey project, it can be noticed that these three agreements would satisfy the definition of works contract as envisaged under Section 65 (105) (zzzza) of the Finance Act 1994. If that be so, the service tax liability if any will be on the appellants from 1.6.2007. It is also be to noticed that the CBEC vide Circular No B1/16/2007-TRU dated 22.5.2007 has in paragraph 9.9 and 9.10 has clarified as under:- Presently, erection, commissioning or installation service [Section 65(105)(zzd)], commercial or industrial construction service [section 65(105)(zzq)] and construction of complex service [section 65(105)(zzzh)] are separate taxable services. 9.9 Various trade and industry associations have raised apprehension in respect of classification of a con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... development, design review, installation and commissioning and technology transfer for study and design of oil free compressor systems, brought the respondent- Company within the scope of Consulting Engineer service as per section 65(13) of the Finance Act. Accordingly, a show cause notice was issued on 10-10-2002 calling upon the respondent-assessee why a service tax of Rs. 23,58,008/- shall not be demanded from it apart from levying interest and penalty under different provisions of the Act. The respondent contended that they are not liable to pay the service tax as Section 65(13) of the Act is not applicable to the respondent-assessee. However, the contention of the assessee was rejected by the Deputy Commissioner of Central Excise (Service Tax Division), Bangalore. Being aggrieved by the same, the assessee filed an appeal before the Commissioner of Central Excise (Appeals), Bangalore, which appeal also came to be rejected. Aggrieved by the concurrent findings, a second appeal was preferred before the CESTAT. CESTAT considering the different provisions of law of the Finance Act came to be conclusion that the assessee is not liable to pay either service tax or the interest or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2006, the Companies were not included under the definition of consulting engineer. When we have taken such a view, considering the relevant assessment year in the present case we have to hold that the service rendered by the assessee-Company during relevant period cannot be brought under the category of consulting engineer. If the service rendered by the assessee cannot be considered as a consulting engineer, the question of calling upon the assessee to pay the service tax under the Finance Act, brought the assessee under the word consulting engineer does not arise at all. Therefore, the said point has to be answered against the revenue and in favour of the assessee. 9. So far as the execution of the works contract is concerned, the works contract is defined under section 65(105)(zzzza) which reads as under: (zzzza) to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams. Explanation.- For the purposes of this sub-clause, works contract means a contract wherein, - (i) transfer of property in goods involved in the execution of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellants own case needs to be re-visited in view of the order of the Larger Bench in the case of BSBK (supra) and also circulars issued by the Board. This contention of the Special Counsel does not carry the case of the Revenue any further for more than one reason. Firstly, we find that the issue before us involved in the current case is regarding the contract of supply, erection, installation and commissioning of fire, hydraulic systems and the issue before us in the case of the appellants own case in Final Order dt. 22/7/2010 was for supply, erection, installation and commissioning of power systems and distribution systems. Though the outcome of execution of the contracts may be different but the contracts were for the similar purposes. It can be noticed from the above reproduced portions of our Final Order, an identical issue in respect of Turbotech Precision Engineering Pvt. Ltd. was before the Honrable High Court of Karnataka that being an issue in respect of consulting engineer service providing design development, design review, installation and commissioning and other services. It is to be noted that Revenue had filed an appeal before Honrable High Court against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause decision of Daelims 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. It can be seen from the above reproduced portion of the order, the Larger Bench decision was on the turnkey contracts and an argument that it can be vivisected and it can be brought into service tax liabilities prior to 01/06/2007 would be running against the decision of the Honble High Court of Karnataka in the case of Turbotech Precision Engineering Pvt. Ltd.(supra), of which have been reproduced by us herein above in the appellants own case in the earlier order. 10. In view of the above findings, we find that the impugned order confirming the demand and imposition consequent penalties and interest is incorrect and needs to be set aside and we do so. 11. Since, we have disposed off the appeal on the question of whether the contracts covered under the category of works contract (which we held it is so), we have not laboured to record any findings on v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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