9911796707
TMI Blog2014 (8) TMI 741X X X X Extracts X X X X X X X X Extracts X X X X ..... engineering, manufacture, testing, supply, transportation, site storage, erection, testing and commissioning of plant and machinery for setting up of the power plant. After discussions with SOEKO authorized representative of CNAICO including issuing letter of intent, finalizing price and other detailed, the appellant had made two contracts one with CNAICO and another with SOKEO, the representative of CNAICO. It is to be added that CNAICO are not the manufacturer of steam turbine but the same are procured by them from another company in China NTC. The total work as mentioned earlier was split up into two parts. First part was covered in the contract with CNAICO and other part was covered by second contract with SOKEO, the representative to SOKEO. Appellants' claim is that the first contract is for supply of equipment while the second contract is for erection and commissioning. In respect of first contract no service tax is paid and for the second contract SOKEO has paid service tax under erection and commissioning service. Revenue's case is that the total work is for design, engineering, manufacture, testing, supply of equipment, transportation, erection, commissioning etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transaction was one of sale of handling system and also sale of other services. Similar view has been taken by the Hon'ble Madraas High Court in the case of State of Tamil Nadu vs Titanium Equipments and Anode Manufacturing Corporation Ltd reported in 1998 (110) STR (43) (Mad). In addition to these, few more judgments were also quoted which are of similar nature. 5. The learned advocate for the appellant submitted that CNAICO is responsible only for the shipment of the goods at port in China and thereafter the responsibility passed on to SOKEO. The appellants have paid price of the goods at the time of shipment at the port in China. Subsequent action by SOKEO is relating to services in India and for the same SOKEO has paid service tax and learned advocate for the appellants further argued that the two contracts cannot be combined to make them liable to for works contract. The learned advocate for the appellants further stated that even if it is assumed that the two contracts forms together works contract still the department has issued the notice under Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 and has asked them to pay 4% duty on the total am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat SOKEO is authorized representative of CNAICO and is entrusted with the responsibility of co-ordination for the entire scope of supply. The learned A.R. submitted that from the above it is very clear that SOKEO is not an independent entity and was the authorized representative of CNAICO with the responsibility of co-ordination for the entire scope of supply. The services provided by SOKEO were on behalf of CNAICO. Thus this was a single contract given to CNAICO. Thus the overall contract is of a works contract service and the appellants are liable to pay service tax under Section 66A of the Finance Act, 1994. 9. It was also submitted that charges for erection, testing and commissioning are just Rs. 1.75 crores as against Rs. 59.75 crores for supply items and thus the service portion is less than 3% of the total cost. Composition Scheme envisaged service portion of 33% of the total cost as per the industry practice. 10. The learned A.R. submitted that the Supply Agreement dated 24.03.2009 is not an agreement for only sale of goods but includes service elements like deputing engineers for supervision of erection job, designing, testing, quality control etc. Further as per statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5) (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 such contract is leviable to tax as sale of goods, and (ii) such contract is for the purposes of carrying out, - (a) erection, commissioning or installation of plant, machinery, equipment or structures, whether prefabricated or otherwise, installation of electrical and electronic devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape staircases or elevators; or (b) construction of a new building or a civil structure or a part thereof, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was in the context of Income Tax and relating to double taxation. The facts in that case were that the appellant had entered into a contract and constituted a consortium of number of companies to execute certain contract where the liability and work of each members of the consortium were separately defined and the said consortium entered into contract with Petronet LNG Ltd. We find that the fact of that case are not comparable to the present case, as here the initial Letter of intent was for the total turnkey project and later on the same contract is split up into two contracts one with CNAICO and other with SOKEO the authorized representative of CNAICO. Moreover, the issues for determination were as under, - "1. On the facts and circumstances of the case, whether the amounts, received /receivable by the applicant from Petronet LNG for offshore supply of equipments, materials, etc. are liable to tax in India under trie provisions of the Act and India-Japan tax treaty? 2. If the answer to (1) is in the affirmative in view of Explanation (a) to section (1)(i) of the Act and/or Article (1) read together with the protocol of the India-Japan tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Rule 3 (i) of the Works Contract/Composition Scheme for Payment of Service Tax) Rules, 2007: Rule 3. (1) Notwithstanding anything contained in section 67 of the Act and rule 2A of the Service (Determination of Value) Rules, 2006, the person liable to pay service tax in relation to works contract service shall have the option to discharge his service tax liability on the works contract service provided or to be provided, instead of paying service tax at the rate specified in section 66 of the Act, by paying an amount equivalent to [Four] 1 per cent. of the gross amount charged for the works contract. Explanation.-For the purposes of this sub-rule, gross amount charged for the works contract shall not include Value Added Tax (VAT) or sales tax, as the case may be, paid on transfer of property in goods involved in the execution of the said works contract. 17. Rule 2A of the Service TAX (Determination of Value) Rules, 2006 provides for determination of value of services involved in execution of the project. The said Rule reads as under: 2A. Determination of value of services involved in the execution of a works contract.- &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvolved in the execution of the said works contract for determining the value of works contract service under this clause (i). 18. It would thus be seen from the said Rule that clause (i) of sub-rule (1) provides that value of works contract service determined shall be equivalent to the gross amount charged for the works contract less the value of transfer of property in goods involved in the execution of the said works contract. We also note that the goods supplied by CNAICO have been cleared on payment of Customs duty after determining the value of such goods and therefore it should be possible to determine the value of transfer of property in goods involved in the execution of the said works contract and thereafter value of the service portion. The normal rate of service tax would be applicable on the value of service so determined. 19. The appellants have also submitted that extended period is not invocable and they have not done any suppression or concealment. We observe that appellant were filing service tax returns but did not indicate anything about above payments on services and therefore there is suppression of facts. 20. It has also been submitted that penalty under S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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