TMI BlogCan turnkey project be vivisected and service tax levied on service part? Decision of Daelim Industrial Co. Ltd. questioned and matter referred to larger benchX X X X Extracts X X X X X X X X Extracts X X X X ..... Can turnkey project be vivisected and service tax levied on service part? Decision of Daelim Industrial Co. Ltd. questioned and matter referred to larger bench - Commentaries / Editorials Dated:- 18-1-2009 - News - It is a long history behind the issue of levy of service tax on deemed sales (works contract in the present case). In Daelim Industrial Co. Ltd. (Reported in 2005 - TMI - 97 CEGAT, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NEW DELHI ) , CESTAT held that a composite turnkey project can not be vivisected and no service tax is leviable. Now the CESTAT, has disagreed with the decision in the matter of Daelim in view of decision of Honorable Supreme Court in the matter of Bharat Sanchar Nigam Ltd. versus Union of India (Reported in 2006 -TMI - 309 - Supreme Court ). While disagreeing with the decision in the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Daelim's case, CESTAT observed that: "10. There is no dispute that, theoretically, service tax can be levied on service part and, at the same time, sales tax can be levied on the sale part of the contract. No doubt, service tax can be levied only if the service is a 'taxable service' within the meaning of Finance Act, 1994. In the case of 'turnkey contract', if they are not split only on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ground that the contract is on turnkey project basis, a question may arise as to whether the entire contract will be sale contract. The answer apparently would be in the negative. Only that part of the contract which falls under clause (b) of Article 366(29-A) - amounting to 'deemed sale' will constitute sale contract on which sales tax can be levied. What will happen to the rest of the contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Whether it will go out of the net of the service tax' Answer again, will be in the negative. No doubt, as observed above, and it goes without saying, the 'service' will have to qualify as taxable service. The case of the respondent is that the service by way of 'advice, consultancy or technical assistance' is provided by MECON as the consultant and they are merely recipient of the service fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om them. 11. 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. But the moot question is whether turnkey contract can be vivisected. The conclusion in Daelim case (supra) on the point, prima facie, being not in accordance with law, we are of the view that it would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appropriate to refer this case to the Larger Bench to consider the correctness of the decision." Matter referred to larger Bench for Re-consideration For full text of Judgment - Visit CCE, Raipur Versus BSBK Pvt. Ltd. - 2008 -TMI - 31489 - CESTAT NEW DELHI - News - Press release - PIB Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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