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2015 (5) TMI 37 - CESTAT BANGALORE (LB)

2015 (5) TMI 37 - CESTAT BANGALORE (LB) - 2015 (38) S.T.R. 709 (Tri. - LB) - Works contract - classification of contract after 01.06.2007 where contract entered into prior to 01.06.2007 - whether "works contract" is a taxable service only w.e.f. 01.06.2007 - Erection, Commissioning or Installation Service - services are not primarily for industry or commerce - aying of pipelines/ conduits for lift irrigation systems for transmission of water or for sewerage disposal - Scope of the term 'Dam' - e .....

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stations and like activity, is classifiable only under Commercial or Industrial Construction Service (CICS) for the period upto 01.06.2007 and not under Erection, Commissioning or Installation Service (ECIS)

Construction of canals for irrigation or water supply; construction or laying of pipelines/ conduits for lift irrigation conceived and integrated into a dam project, must be classified as works contract "in respect of dam" and is thus excluded from the scope of "Works Contract Ser .....

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as well. On and since 01.06.2007, turnkey/ EPC contracts must be classified on the basis of the essential character of the service provided thereby, with the aid of classification guidelines set out in Section 65A(2) of the Act. Consequently, a turnkey/ EPC contract must be classified under any of the clauses (a) to (d), Explanation (ii), Section 65(105)(zzzza). The bundled bouquet of services provided as turnkey/ EPC contract, classifiable as Commercial or Industrial Construction Service (CICS .....

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, domestic consumption or sewerage disposal even where executed as turnkey/ EPC contracts; (i) would be classifiable under clause (b), Explanation (ii) of Section 65(105) (zzzza); (ii) construction of canals, pipelines or conduits for Government/ Government undertakings for augmentation of irrigation, water supply or sewerage disposal would be for a non-commercial, non-industrial purpose or user and thus excluded in view of the exclusionary clause in clause (b) of WCS definition; and (iii) const .....

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turnkey/ EPC contractual mode and would fall within the ambit of clause (b), Explanation (ii) of Section 65(105)(zzzza); and would consequently not be exigible to service tax, in view of the exclusion enacted in clause (b)

This is the only possible and harmonious interpretation possible of the several clauses under Explanation (ii) of Section 65 (105)(zzzza), a distinct taxable service defined with constituent elements thereof substantially drawn from elements of pre-existing taxable .....

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pal contractor cannot be considered to have provided the taxable (works contract) service enumerated and defined in Section 65(105)(zzzza) of the Act. - Service Tax Appeal Nos. 441, 606, 607, 898, 937 AND 211 of 2009 , Service Tax Appeal Nos. 398, 425, 1210, 1850 AND 2148 of 2010, Service Tax Appeal Nos. 918, 919, 920, 921, 922, 2818, 2819, 2820 AND 3174 of 2011 - Interim Order Nos. 57 to 112/2015 - Dated:- 28-4-2015 - G Raghuram, President , Ms Archana Wadhwa, Member (J) And Mr B S V Murthy, Me .....

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ROJECTS LTD , M/s IVRCL NAVAYUGA SEW JV , M/s IVRCL JL- JV , M/s IVRCL -KBL- MEIL-JV , M/s IVRCL -KBL-JV , M/s IVRCL SEW -PRASAD-JV, M/s GKC PROJECTS LTD , M/s MAYTAS NCC JV , M/s PATEL ENGINEERING LTD, M/s AKR COASTAL JV , M/s IVRCL-JL- JV , M/s IVRCL -KBL-MEIL- JV , M/s IVRCL -KBL- JV , M/s PES-SEW-JV , M/s MEGHA ENGINEERING AND INFRASTRUCTURE LTD, M/s P V KRISHNA REDDY, MD OF M/s MEGHA ENGINEERING AND INFRASTRUCTURE LTD, M/s LANDT KBL JV M/s SUDHAKAR POLYMERS LTD, M/s LANDT KBL JV , M/s IVRCL .....

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VT LTD , M/s KOYA AND CO CONSTRUCTION PVT LTD , M/s PATEL ENGINEERING LTD , M/s SRI VENKATESWARA PIPES LTD , M/s KIRLOSKAR BROTHERS LTD , M/s NAVAYUGA-IVRCL-SEW-JV , M/s NEC-NCC MAYTAS JV , M/s SEL-GKC PROJECTS JV, M/s CH VV SUBBA RAO Versus CC,CE & ST, HYDERABAD ORDER Per: Justice G. Raghuram We have heard learned Sr. Counsel Shri V. Sridharan, Shri S. R. Ashok and Sh. S. Ravi; learned Counsel Shri B.V. Kumar, G. Natarajan, Md Shafi, K. Vijay Kumar, R. Murlidhar and Ms. Nisha Bineesh, for t .....

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ench, presided by the President and to be disposed of by 15.03.2015. 3. The full Bench assembled on 15.12.2014 to hear the appeals (in terms of the direction of the Hon'ble Supreme Court), after issue of notices to parties concerned. The appeals were heard during 15.12.2014 to 19.12.2014. 79 matters were listed on the Board of the full Bench. Of these, in 19 appeals stay applications were pending disposal and Revenue contended that these appeals be not disposed of without considering waiver .....

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consideration before the Andhra Pradesh High Court, was not contested. Shri B. V. Kumar, learned Counsel also pointed out that in S. T. Appeal No. 3394 of 2012, the liability is also confirmed on the basis that the appellant (SCL Infratech Ltd.) had also provided Business Auxiliary Service and was the recipient of Management and Business Consultancy Service wherefor the liability was confirmed on reverse charge basis, erroneously. 4. Appellants are the assessees, who had provided construction r .....

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constructions were subsequent to 01.06.2007. In appeals involving execution which commenced prior to 01.06.2007 and continued thereafter the transactions were classified (in respective adjudication orders impugned), as -Erection, Commissioning or Installation Service' (ECIS) for the period prior to 01.06.2007; and as works contract service (WCS) [under sub-clause (e) of Explanation (ii) in Section 65(105)(zzzza)] for the period subsequent to 01.06.2007. 5. Senior Counsel Shri V. Sridharan, S .....

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s ECIS; Commercial or Industrial Construction Service (CICS); or Construction of Complex Service (COCS). The issue whether works contract was taxable prior to 01.06.2007 was heard and reserved for judgment by a special Bench (five Members) of the CESTAT. The judgment on this issue was not pronounced (as on the date of conclusion of arguments in the batch of appeals). We therefore informed the Bar that this issue and in the circumstances cannot appropriately be decided by this Bench and must awai .....

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cluding the issue whether works contract was a taxable service prior to 01.06.2007. All parties agreed to this course of action. On behalf of the several Counsel, five issues were identified for disposition by this Bench. Revenue does not demur. The issues presented for our consideration are: Issues : A) Whether laying of pipelines for lift irrigation systems, transmission and distribution of drinking water or sewerage, undertaken for Government/ Government undertakings should be classified unde .....

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not used or to be used, engaged or to be engaged primarily for industry or commerce; B) Whether construction of canals for irrigation purposes and laying of pipelines including as part of lift irrigation systems, undertaken for the Government/ Government undertakings is liable to service tax under WCS as turnkey projects, including engineering, procurement and construction or commissioning projects under clause (e) of Explanation (ii) in the definition of WCS or is excluded from the ambit of WCS .....

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n (ii) of WCS is considered a distinct and independent service, where construction of canals for irrigation purposes and laying of pipelines either as part of lift irrigation systems or for transport and distribution of water is undertaken for Government/Government undertakings, the same is more appropriately covered under clause (b) of WCS i.e. construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, by applying principles of classification set out in .....

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actor (which is a joint venture) to sub contractors, in the absence of any transfer of property in goods involved in the execution of such works, from the main contractor to the Government/ Government undertakings, whether levy of service tax in the hands of appellant (main contractor) is valid under WCS, in the light of the judgment in State of A.P. vs. L & T Ltd - 2008-TIOL-158-VAT-SC. 8. In view of submissions by respective parties adverted to above (of not hearing appeals where stay appl .....

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fter recording our conclusions on the five issues we shall remit the appeals for determination on merits, to the appropriate Bench, to be disposed of, in accordance with law and the conclusions recorded by this Bench, on the five issues we pronounce our conclusions on. 9. Ld. Counsel for appellants furnished a consolidated list of appeals, setting out the respective appeal numbers; description of the appellant; the period involved; the quantum of service tax and penalties confirmed; the nature o .....

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certain appeals where ld. Counsel contended that the majority of the works were sub contracted and only some of the works were executed by the appellant, a Joint Venture. We have tabulated this category of appeals separately. 10. In the following appeals the works are claimed to have been wholly sub contracted by the appellant and executed exclusively by the sub-contractor. TABLE - A Appeal No. & Name of the Appellant Period involved Nature of the work undertaken Whether the demand is on the .....

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ork excavation. Yes ST/607/2009 M/s Gayathri BCBPPL JV 4/2008 to 9/2008 Work executed for Narmada Valley Development Department towards execution of canal system for Indira Sagar Project. Yes ST//898/2009 M/s Ramky Infrastructure Ltd. WPIL JV. 6/2007 to 5/2008 Execution of pumping station. Yes ST/398/2010 6/2007 to 9/2008 iv) Govt. of MP - PHE Dept. Lashkar -Gwalior zone 90 MLD Sewage pumping station. v) Govt. of WB- Dte. Of PHE - Nadia District - Surface water based water supply schemes for ars .....

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Station. Yes ST/918/2011 M/s IVRCL - Navayuga SEW JV 6/2007 to 9/2008 Execution of Sripada Sagar Project - Phase-I. The work involves investigation, soil exploration, design, supply installation, testing and commissioning of pumping machinery, transformer sub-stations, raising mains, construction of pump houses and other civil structures, channels without lining and deliver cistern, etc. Yes ST/919/2011 M/s IVRCL-JL-JV 6/2007 to 9/2008 Execution of HNSS Lift Irrigation scheme and the work invol .....

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aying of pipelines. Yes ST/921/2011 6/2007 to 9/2008 i) Pilot Micro Irrigation scheme under Gandikota Reservoir; and ii) Pada Lift Irrigation scheme - Gandikota Reservoir. The scope of work involves laying of pipelines as part of lift irrigation work, drawing water from Gandikota Reservoir. Yes ST/922/2011 M/s IVRCL -SEW- Prasad JV 6/2007 to 9/2008 A total 15 projects are involved, which are canal work / lift irrigation works. Yes ST/177/2012 M/s AKR Coastal JV 6/2007 to 9/2009 Survey, detailed .....

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Lift Irrigation scheme and the work involves pipelines/ conduits. The scope of the work involves investigation, designs, construction of pumping stations, erection, commissioning and testing of mechanical and electrical accessories, civil works, pump house including sumo, pumping mails, etc. HNSS Main Canal and Branch Canal. These works are part of the pipeline construction works. Yes ST/182/2012 M/s IVRCL-KBL-MEIL-JV 10/2008 to 9/2009 Execution of HNSS Lift Irrigation scheme & Kalleswaram .....

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ansportation & erection of steel liner, penstock and appurtenant works of Myntdu Leshka Hydro Electrical Project (2x24 MV) for the State Electricity Boad. Yes ST/1676/2012 M/s L&T KBL JV 10/2008 to 9/2009 Package No. L104/06-07- investigation, design, supply and erection of necessary lift systems with all electrical and mechanical components, surge protection systems and all control valves for lifting 7.50 TMC in 45 days from storage Reservoir-3 (+260.00M) including improvements to Goddu .....

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acity of 0.07 TMC in Anantapur District. Yes ST/3348/2012 M/s IVRCL-KBL- MEIL-JV 10/2009 to 9/2010 Execution of HNSS Lift Irrigation scheme & Kalleswaram Lift Irrigation scheme. The work involves laying of pipelines and other associated electro mechanical works. Yes ST/3349/2012 M/s IVRCL-KBL-JV 10/2009 to 9/2010 i) Pilot Micro Irrigation scheme under Gandikota Reservoir; and ii) Pada Lift Irrigation scheme - Gandikota Reservoir. The scope of work involves laying of pipelines as part of lift .....

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(2x24 MV) for the State Electricity Board. Yes ST/25369/2013 M/s IVRCL-SEW- Prasad JV 10/2008 to 3/2011 In this appeal, a total 15 projects are involved, which are either canal work or lift irrigation works. Yes ST/25532/2013 M/s IVRCL-SEW-WPIL-JV 5/2008 to 3/2011 Execution of AVR HNSS Lift Irrigation scheme - Phase-II. The project is aimed at transporting water from Srisailam Reservoir for irrigation purpose. Yes ST/25754/2013 M/s GH Reddy Associates & KK Reddy & Co. JV 6/2007 to 1/200 .....

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stations. Yes ST/20922/2014 M/s SEL-GKC Projects JV 2008-2012 Flood Flow Canal Project Yes 11. In the following appeals the execution was undertaken by the appellant itself, not sub-contracted. TABLE - B Appeal No. & Name of the Appellant Period involved Nature of the work undertaken Whether the demand is on the main contractor and the actual work was executed by the sub-contractor ST/441/2009 M/s Lanco Infratech Limited 6/2007 to 7/2008 Construction of canal - HNSS scheme No ST/937/2009 M/s .....

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Godavari District including (a) "Conducting detailed investigation of Polavaram Project right main canal including subsoil exploration preparation of hydraulic particulars, design of CM&CD works, fixing B.M. stones along main canal, preparation of LP schedules, excavation of main canal and can lining, construction of CM & CD works, plantation along the main canal, formation of service roads on left bank of main canal complete excluding cost of land acquisition in package No. PPRMC-7 .....

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ect, water supply pipeline laying work in various municipal cities. No ST/2148/2010 M/s Gayathri Projects Limited 7/2008 to 3/2009 Package-II of Nagavalli - formation of flood bank on Nagavalli Ribber. No ST/2818/2011 M/s GKC Projects Limited 2007-08 Formation of flood banks. No ST/2819/2011 M/s GKC Projects Limited 2008 -09 Formation of flood banks. No ST/2820/2011 M/s GKC Projects Limited 2009-10 Formation of flood banks. No St/131/2012 M/s Patel Engg. Ltd. 12/2005 to 9/2009 i) Bhima Lift Irri .....

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to 03.05.2011 Laying of pipelines. No ST/3394/2012 M/s SCL Infratech Limited 10/2005 to 12/2010 - No ST/3432/2012 M/s Megha Engg. & Infrastructure Ltd. 4/2010 to 3/2011 Various lift irrigation projects and water supply projects, all involving laying of pipelines and other associated works. No ST/25019/2013 M/s Bhoorathnom Construction Co. Pvt. Limited 1/2006 to 12/2010 Construction of pipelines for drinking water supply, irrigation; seweage disposal; construction of reserviour with cannals .....

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132/33 KV, 25MVA, 3 phase, 50Hz ONAN/ONAF on load tap changer power transformer with all standard fittings, with all leads and lifts for the work of Kurha Vadoda not provided by KNR (Appellants) are liable to pay Service Tax? Lift irrigation scheme of two numbers. No ST/26382/2013 M/s NCC Limited 10/2003 to 9/2011 i) Indore Municipal Corporation - Urban water supply and environmental improvement project ii) Govt. of A.P. -CAD Deptt. Pushkara Lift Irrigation scheme. iii) Govt. of A.P. -CAD Deptt .....

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eme. Viii) Govt. of Jharkhand - Drinking water and Sanitation Deptt. -Dhanbad Water Supply scheme, Phase-I. Ix) Govt. of Jharkhand - Drinking water and Sanitation Deptt. Dhanbad Water Supply Scheme, Phase-II. No ST/26452/2013 M/s Koya & Co. Constructions Pvt. Ltd. 6/2007 to 3/2011 Venkatanagaram Pumping Scheme, Guthpa Lift Irrgation scheme, Telugu Ganga Project, Narmada Canal Project, Water supply pipeline laying work in various municipal cities. No ST/26453/2013 M/s Koya & Co. Construct .....

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pes Limited 4/2007 to 3/ Supply, delivery, laying and jointing of pipelines of Asbestos cement pipes, DI pipes, PVC/HDPE pipes, pumping mains, Construction of sump, pump houses, filteration plants storage reservoirs for Public Health Engineering and Panchayat Raj Depts. Of Govt. of A.P. for safe drinking water supply. (For one project, prior to 01.06.2007, demand has been made under CICS). No ST/20285/2014 M/s Kirloskar Brothers Limited 6/2007 to 3/2012 Various projects in respect of water suppl .....

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, pumping mains, construction of sump, pump houses, filteration plants storage reservoirs for Panchayati Raj RWSS (Rural Water Supply and Sanitation) deptt. of Govt. of A.P. No 12. In the following appeals (according to ld. Counsel) the majority of the several works undertaken were sub-contracted on back to back basis and only few of the works were executed by the appellant itself. TABLE - C Appeal No. & Name of the Appellant Period involved Nature of the work undertaken Whether the demand i .....

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ork executed by the JV). ST/25529/2013 M/s R.M. Mohite & Co. Bhooratnam JV 6/2007 to 7/2009 10.09.2009 Bhima Lift Irrigation Project - Package No. 13 - Investigation design estimation and excavation of high level RIGHT MAIN CANAL, distributor system including construction of CM & CD works etc. to feed ayacut of 28,400 acres under Sangambanda balancing reservoir, Sangambanda (V) Makhthal (M) Mahboobnagar District on EPC Turnkey basis. Section 105(zzzza) Explanation (ii)(b). Some were exec .....

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unsel for the appellants, presumably since appeals are not being finally disposed of by this Bench. In the circumstances, all contested issues of fact including as to the nature of the works executed and whether some of them were sub-contracted or otherwise and other issues not determined by this Bench, will be determined by the appropriate Bench which hears the appeals substantively. The determination by this Bench is, in the circumstances, confined to consideration of the five issues set out i .....

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nd were classified in the adjudication orders under appeal as ECIS, while negating claims by appellants that these transactions be classified as CICS. In view of the dispute as to classification of the works undertaken by appellants during the above period, we set out the relevant provisions including amendments made thereto from time to time. ECIS W.e.f. 01.07.2003, a service provided or to be provided to a customer by a commissioning or installation agency, in relation to commissioning or inst .....

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rovided or to be provided to a customer, by a commissioning or installation agency, in relation to erection, commissioning or installation. Section 65(28) was omitted w.e.f. this date and Section 65(29) amended to insert the word "erection" before "commissioning or installation". Also from this date, Section 65(39a) defined "erection, commissioning or installation" to mean: Any service provided by a commissioning or installation agency in relation to erection, commi .....

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llation of- (a) Electrical and electronic devices, including wirings or fittings therefor; or (b) Plumbing, drain laying or other installations for transport of fluids; or (c) Heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work; or (d) Thermal insulation, sound insulation, fire proofing or water proofing; or (e) Lift and escalator, fire escape staircases or travelators; or (f) Such other similar services;" The definition was further amended w .....

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sport of fluids; or (c) Heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work; or (d) Thermal insulation, sound insulation, fire proofing or water proofing; or (e) Lift and escalator, fire escape staircases or travelators; or (f) Such other similar services;" CICS "Construction Service" was introduced w.e.f. 10.09.2004. Section 65(105) (zzq) provided that this taxable service means any service provided or to be provided to a person by .....

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r commerce or industry, but does not include road, airport, railway, transport terminal, bridge, tunnel, long distance pipeline and dam ;" W.e.f. 16.06.2005 Section 65 (30a) was substituted to insert therein a new service termed: "construction of complex" service (COCS), on relocating and redesignation of the extant "construction service" as "commercial or industrial construction" service and incorporating this service in Section 65(25b). W.e.f. this date CICS .....

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or fittings and other similar services, in relation to building or civil structure; or (d) Repair, alteration, renovation or restoration of, or similar services in relation to, building or civil structure, pipeline or conduit, Which is- (i) Used, or to be used, primarily for; or (ii) occupied, or to be occupied, primarily with; or (iii) engaged, or to be engaged, primarily in, commerce or industry, or work intended for commerce or industry, but does not include such services provided in respect .....

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service was introduced and specified to be a taxable service in Section 65(105)(zzza); defined in Section 65(97a) to mean a service provided or to be provided to any person, by any other person, in relation to site formation and clearance, excavation and earthmoving and demolition and such other activities. Section 65 (97a): "Site formation and clearance, excavation and earthmoving and demolition" includes, - (i) drilling, boring and core extraction services for construction, geophysic .....

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of CICS (as amended from time to time) it is apparent that a service falling under this definition was taxable only if it is primarily used for or is engaged in commerce or industry or work intended for commerce or industry. This service when provided in relation to roads, airports, railways, transport terminals, bridges, tunnels, long distance pipeline and dams is however wholly excluded from the purview of the definition itself. In the definition of ECIS however (as amended from time to time), .....

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transport terminals, bridges, tunnels, dams, ports or other ports. It is therefore essential to examine the contours of ECIS and CICS, as these services are defined and to normatively ascertain in what circumstances and which category of transactions fall within either ECIS or CICS. To the extent relevant for the analyses on issue (A), it requires to be noticed that w.e.f. 16.06.2005 the definition of ECIS enjoins that this service means any service provided by a commissioning and installation .....

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, wall covering and well papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services, in relation to building or civil structure; or (d) repair, alteration, renovation or restoration of, or similar services in relation to, building or civil structure, pipeline or conduit, which is used or to be used; engaged or to be engaged, primarily in commerce or industry or work intended for commerce or ind .....

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t such activities fall within CICS and in others that these fall within the ambit of ECIS. We shall shortly advert to the relevant rulings. Though, we are not deciding the appeals finally, we shall briefly refer to the nature of the contract in issue in Service Tax Appeal No. 501 of 2012 [enumerated in Table -B' in para 11 (supra)] since the period of the transaction involved in this appeal is June 2005 to March 2010 (part of the period falling prior to 01.06.2007). The activity was classifi .....

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e provided by the Government. The appellant's claim that the contract considered as a whole falls outside the scope of ECIS (during the period prior to 01.06.2007), was rejected by the adjudicating Authority. 15. ANALYSES OF CASE LAW : Now we advert to decisions where the scope of ECIS and CICS, in the context of works involving laying of pipelines, was considered. (i) In Indian Hume Pipe Co. Ltd. vs. Commissioner of C. Ex. Trichy 2008 (12) STR 363 (Tri. Chennai), the appellant was a manufac .....

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. The ld. Consultant for the Revenue argued that the pipelines supporting machinery like pumps etc., sumps and other supporting civil structures built by the assessee could very well be called a plant. The erection, commissioning or installation service and the corresponding entry since 1.7.03. Argument that the pipeline was not installed or commissioned by IHPL was misleading. The activity involved laying, jointing, testing and commissioning of PVC pipes which resulted in emergence of a pipelin .....

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that same item could not be charged to tax under another heading. Clause (30a) underwent a change in 2005 budget omitting this exclusion. The impugned service was not in the course of commerce and had to be classified under erection, installation or commissioning service. The Daelim Industrial Company (supra) was not relatable to the present case. The Daelim Industrial Company case decided that a works contract could not be vivisected and the service portion subjected to tax. SLP filed against t .....

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case had supplied PSC girders to M/s Konkan Railway Corporation for construction of bridges under a works contract, excise duty was leviable on PSC girders. It is submitted that in principle, in the face of specific charging provision to levy service tax on certain specified services, the mechanism of agreement to provide and receive services in the form of a composite contract or works contract could not vitiate levy itself, Erection, installation or commissioning was already leviable to servi .....

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ing out certain institutional activity for business". The water supply system involving pipelines is therefore seen as a plant. The activity undertaken by IHPL is construction of pipeline by earthwork excavation, conveying and lowering of PSC/MS pipes and MS specials, AC pipes, PVC pipes, CI/GI pipes and jointing materials into the trench; laying to proper grade and alignment; refilling the trenches with excavated soil after laying of pipes, construction of sluice valve pits, scour valve pi .....

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Installation implies setting up the machinery ready for use, like giving power connections or installing driver software in the case of a machine run with the aid computer software. Commissioning involves the operationalisation of the machinery after which it starts functioning regularly. In laying of long distance pipeline, earth is dug and pipes laid and jointed, and the pipes pass through sumps with boosters at intervals, if necessary. This activity will not involve erection. 8.2 As rightly a .....

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rection became part of the entry only from 10.09.2004, from 16.6.05 onwards meaning of -erection, commissioning or installation' [Section 65(39a)] was enlarged to include installation of various devices and equipments. An entry "plumbing, drain laying, or other installation for transport of fluids" was introduced under sub-section (ii)(b). The impugned order found that the service involved was specifically covered from 16.6.05 under the same head by the entry "plumbing, drain .....

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interpretation of the Commissioner of the expression plant. The Commissioner's interpretation of a plant would cover a long distance pipeline. We find it difficult to accept the above reading of the word plant in the context it is used. It is an inappropriate selection of the various meanings of this simple word. Plant in popular usage means a cluster of buildings or a building in which machinery are installed usually for manufacture of goods. Long distance pipeline is not even remotely ass .....

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mmissioning and installation of a plant is totally misconceived and unacceptable. (ii) The decision in Indian Hume Pipe Co. Ltd. (supra) was followed in A. Sekar vs. CCE 2010 (19) STR 82 (Tri. Chennai), Trichy; Dinesh Chandra Agrawal vs. A. Infracon Pvt. Limited 2011 (21) STR 41 (Tri. Ahm.); in an interim order in Surindra Engineering Co. Limited vs. CC, Mumbai 2012 (27) STR 77 (Tri.Mumbai), and in Lalit Constructions vs. CCE, Raigad (Tribunal Decisions) 2012 (27) STR 138 (Tri. Mumbai). The Madr .....

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finition of CICS, defined in Section 65(25b). Apart from the decisions referred to above which consistently ruled that construction of a pipeline for transmission of water or sewerage falls outside the scope of ECIS, it requires to be noticed that construction of pipelines involves associated works such as digging trenches, construction of supporting masonary structures, jointing of pipes; and in cases of construction of pipelines for lift irrigation, pumping / booster stations and other electro .....

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ebster, the word means "someone or something that is used as a way of sending something from one place or person to another". According to Macmillan Dictionary - "A pipe or passage that water flows through, to go from one place to another. According to Collins Dictionary - "a pipeline or channel for carrying fluid". According to the Dictionary of Civil Engineering by John S. Scott, "conduit" means - "Any open channel pipe, etc. for flowing liquid". Wa .....

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while pressure conduits have a confined water surface. Under each of these general classifications there are several types of conveyance systems in common use. Pressure Conduits are enclosed pipes where water flows at a pressure higher than the atmospheric pressure. S. B. Sarkar's Words and Phrase of Customs and Excise (4th Edition) states that "conduit" is a channel, pipe, tube or duct through which a fluid, liquid or gas may pass; a channel for conveying water or other fluid or .....

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lause which provides the most specific description shall be preferred to sub-clauses providing a more general description; (b) Composite services consisting of a combination of different services which cannot be classified in the manner specified in clause(a), shall be classified as if they consisted of a service which gives them their essential character, insofar as this criterion is applicable; (c) When a service cannot be classified in the manner specified in clause (a) or clause (b), it shal .....

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commercial complex as well as a transport terminal cannot be vivisected for the purpose of levy of service tax, added that a solution must be found as laid down in Section 65A(2) of the Act. The Board clarified: Though, this provision is intended to be applied to cases where two distinct taxable services are provided in a composite manner, the principle laid down therein can nonetheless be extended to different portions of a single taxable service as well; and that the part (of the contract) tha .....

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on of different services must be classified as if they consisted of the service which gives them the essential character, in so far as this criterion is applicable, vide Section 65A(2)(b). Considered in the light of the precedents referred to herein above; the definitions of ECIS and CICS; the Board clarification dated 07.01.2010; the Dictionary meanings ascribed to the word "conduit"; and provisions of Section 65A(2)(a) and (b), we conclude that construction of a pipeline / conduit fo .....

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cuted for Government or Government undertakings as part of irrigation, water supply, or sewerage projects, the works are not exigible to service tax under CICS (prior to 01.06.2007), since these are not primarily for commercial or industrial purposes and are excluded from the scope of the taxable services qua the exclusionary clause definition of CICS, in Section 65(25b) of the Act. 16. ISSUES (B); (C) and (D) : These issues overlap and invite integrated analyses. W.e.f. 01.06.2007 (by the Finan .....

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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 pre-fabricated 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 .....

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ey projects including engineering, procurement and construction or commissioning (EPC) projects. 17. Contentions on behalf of assessees - (a) The legislative intention underlying introduction of "works contract" as a taxable service is to bring to tax, service components of specified composite contracts. This is evident from the Budget speech by the Hon'ble Finance Minister (while introducing the Finance Bill, 2007-2008); the relevant portion reads: 154. State Governments levy a ta .....

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ich reads: (i) Commercial or industrial construction services', in brief, cover construction of and the completion, finishing, repair, alteration, renovation, restoration or similar activities pertaining to buildings, civil structures, pipelines or conduits. Therefore, only such electrical works that are parts of (or which result in emergence of a fixture of) buildings, civil structures, pipelines or conduits, are covered under the definition of this taxable service. Further, such activities .....

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not result in emergence of an erected, installed and commissioning plant, machinery, equipment or structure of does not result in installation of an electrical or electronic device (i.e. a machine or equipment that uses electricity to perform some other function) the same is outside the purview of this taxable service. (iii) Works contract incorporates the inclusions and exclusions of the aforementioned two taxable services (amongst others) and it is the nature of the contract (i.e. a contract .....

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t;turnkey projects including engineering, procurement, construction or commissioning (EPC) projects", as a works contract. The terms "EPC / Turnkey" denote the mode of and the integers embedded in execution of large projects. There is no statutory definition provided of these terms. The following are the definitions of EPC / turnkey contracts as per technical Dictionaries. (a) Dictionary of Civil Engineering - John S. Scott (4 th Ed.). Turnkey contracts/ design and build contract/ .....

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person, not to four or five consultants. So the turnkey contractor must be both trustworthy and competent. (b) Duncan Wallace - Building and Engineering Contracts - "Turnkey" is a contract where the essential design emanates from, or is supplied by the Contractor and not the owner, so that the legal responsibility for the design, suitability and performance of the work after completion will be made to rest with the contractor. Turnkey is treated as merely signifying the design respons .....

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key construction contracts reduce the risk to the buyer of the construction services and provide an incentive for the company to stay within the budget. (e) International Federation of Consulting Engineers ; Extract from "applicability of different patterns of General Conditions of Contract". (i) "EPC / Turnkey Contract 1. Is it a Process Plant or a Power Plant (or a factory or similar) where the Employer - who provides the finance - wishes to implement the project on a Fixed-Pric .....

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the Employer does not wish to be involved in the day-to-day progress of the construction work, provided the end result meets the performance criteria he has specified - and the Employer is willing to pay more for the construction of his Project (than would be the case if the Conditions of Contract for Plant and Design-Build were used) in return for the Contractor bearing the extra risks associated with enhanced certainty of final price and time". (ii) EPC - Engineering Procurement Construct .....

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s the Execution phase which normally follows what is know as a FEED or Front End Engineering Design phase. The FEED is a basic engineering design used as the basis for the EPC phase. The FEED can be divided into separate packages covering different portions of the project. The FEED packages are used as the basis for bidding on when the client offers the EPC work to the market. Normally the EPC Contractor has to execute and deliver the project within an agreed time and budget, commonly known as a .....

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/ PMC will ensure the EPC Contractor is carrying out the works in accordance with the agreed scope of works and in accordance with the Contract. It is quite common for the Engineering and Construction Contractor which delivered the FEED to be offered to Project Management Consultancy (PMC) Contract. In some instances which can be related to the time a project owner would like the project delivered, and engineering and construction company can be given work on a direct reimbursable basis to start .....

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Contractor and Project Owner during the execution of EPC activities. (f) Extracts from "Understanding and Negotiating Turnkey and EPC Contracts", by Joseph A. Huse (2002) Under an EPC agreement, the contractor provides all of the engineering, procurement and construction. Under a turnkey contract, the contractor supplies the final design of the project. From the perspective of the author these terms are largely interchangeable. Design Build, EPC and Turnkey. The "turnkey" ar .....

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o describe the more general global arrangement of placing all design, procurement and construction responsibilities on one contractor. The turnkey system generally uses the lump sum pricing method". (g) Distinction between "EPC" and "Turnkey" contracts - Wikipaedia - EPC is a contract comprising Engineering, Procurement and Construction. Turnkey is a contract comprising Engineering, Procurement and Construction. If you look at the definition, you may find no difference b .....

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n and commissioning, start up and take over of the plant to the employer but in EPC, may be it is responsibility of the other third person to do commissioning and start up. (c) From the above meanings of "EPC/ Turnkey", it is apparent that these are modes of execution of contracts involved in large, complex projects, where the scope of the contract commences from the engineering or design stage on to completion of the project in its entirety and is normally for a lumpsum, with full res .....

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ted with other services are provided by way of turn key projects including EPC. (d) While clauses (a) to (d) in the definition of WCS are drawn from pre-existing definitions of taxable services such as ECIS, CICS and COCS - defined in Section 65(39a) and (91a), 65(25b) and Section 65(30a) clause (e) is intended to cover all modes of executing works contract falling within sub-clauses (a) to (d) including when executed as EPC/ Turnkey projects. The legislative intention is to tax all genres of se .....

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Real Estate Consultant Service - (clause 89), Site Formation and Clearance, Excavation and Earth Moving and Demolition Service (clause 97a), Technical Testing and Analyses Service - (clause 106); Technical Inspection and Certification Service - (clause 108), as well. One of more of the above services, apart from defined components of ECIS, CICS or COCS would invariably be bundled into an "EPC/ Turnkey mode of execution of a works contract defined in Section 65(105)(zzzza). (v) Sub-clause ( .....

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with either cement concrete, geo-membrane or geo textiles etc. for irrigation, lift irrigation, water supply, or sewerage purposes, is involved. Clause (b) of the definition of "works contract" includes "a pipeline or conduit, primarily for the purpose of commerce or industry". The words "pipeline" and "conduit" are not defined. "Conduit", according to general and technical Dictionaries means a passage for water or any other liquid; and a conduit .....

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porting masonary and mechanical works, for pumping the fluids/ water to higher elevation. If "conduit" were not given the pluri-signative meaning as considered in general and technical Dictionaries and its commercially accepted purport, it would lead to the absurd consequence where a contractor engaged in pipeline laying work would fall outside the ambit of tax when the work is not for commercial or industrial purpose while a contractor executing canals for critical irrigation projects .....

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isposal purposes, the works are not for commercial or industrial purposes and would fall outside the scope of the definition in clause (b) of WCS. The residual entry in clause (e) is an enactment ex abundant cautela. Further, in terms of Section 65A, the specific description/ definition of a taxable service must prevail over the generic description, which describes a mode of execution, as in clause (e). (vii) The definition of "works contract" excludes works contract in respect of a &q .....

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s, are usually used across broad rivers to retain water. Concrete dams may take various forms; (ii) Cambridge Dictionary - a wal l built across a river that stops the river's flow and collects the water, especially to make a reservoir (an artificial lake) that provides water for an area" ; (iii) Oxford Dictionary - a barrier constructed to hold back water and raise its level, forming a reservoir used to generate electricity or as a water supply; (iv) Collins Dictionary - a barrier of co .....

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e used to collect water or for storage of water which can be evenly distributed between locations (e) From the above meanings of "dam" it is clear that it is a barrier erected for impounding water and serves the primary purpose of retaining water in the reservoir appurtenant thereto, to provide water for irrigation or drinking purposes and for supply to nearby villages /towns, by way of canals, feeder channels etc. Without construction of channels / canals which are inlets/ outlets for .....

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ncements as having the widest meaning and being wider in its connotation than the word "in" or "on". Hence, execution of channels/ canals not only amounts to construction of a conduit but is also covered by the exclusion clause in the definition of "works contract", as a works contract -in respect of' dam. (g) An "EPC / Turnkey" Project refers to a contract where the entire responsibility for execution, from the stage of design is on the contractor and .....

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stretch of the channel/ canal/ pipeline, awarded under the specified package. Unless the entire length of the channel/ canal/ pipeline is constructed, the project is incomplete. In the circumstances, works executed by each of the appellants comprising only a part / segment of the entire project cannot be considered EPC/ turnkey. In some of the appeals, only preparatory work such as execution or strengthening of embankment of the canal work is awarded but is yet called as EPC / turnkey. Such work .....

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notwithstanding its description as such in the relevant agreements. (h) Section 65(97a) defines "Site Formation and Clearance, Excavation Earthmoving and Demolition", which service is defined to include- (i) drilling, boring and core extraction services for construction, geophysical, geological or similar purposes; or (ii) soil stabilization; or (iii) horizontal drilling for the passage of cables or drain pipes; or (iv) land reclamation work; or (v) contaminated top soil stripping wor .....

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ity when it is provided in relation to agriculture, irrigation, watershed development and drilling, digging, repairing, renovating or restoring of water sources or water bodies. In the EPC / turnkey mode of execution of construction services, site formation and clearance components would also be included as part of the bundled services provided. It would lead to absurd and legislatively unintended consequences if site formation and clearance services provided in respect of agriculture, irrigatio .....

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ing or a civil structure or a part thereof; a pipeline; irrigation, commissioning or installation of plant, machinery, equipment or structures; and plumbing, laying of drains or other installations for transport of fluids. Other activities involved are in the nature of designing of structures to be executed; Design and Engineering, Procurement and Installation; Commissioning and like works. Taken together, the several activities can not be classified in anyone of the clauses (a) to (d) of WCS. T .....

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from Godavari river near Kannepally (v) near Kaleswaram of Karimnagar District to feed an ayacut of 45,000 acres. This work is not only for the of the population residing in these areas but also to farms, industrial areas, commercial establishments, complexes, malls etc., of those areas; (iii) In view of the decision in Bangalore Water Supply and Sewerage Board and Others vs. R. Rajappa and Others AIR (1978) SC 548, whether a particular body is an industry is not dependent on whether the activit .....

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ce in the definition of WCS), means only the civil construction and installation of gates extending to the stretch of the river or stream. A "Dam" is confined to that portion of the structure which obstructs the natural flow of water in a river or a stream. No civil construction, structure or installation extending beyond the main Dam structure would fall within the meaning of the word "Dam". Thus, canal systems which originate beyond the main "Dam" structure cannot .....

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nstruction leads to an absurdity is it permissible to resort to external aids. The Act excludes "Dam" from the scope of WCS in the definition. In defining "Site Formation Service" the Act employs a different exclusionary formula and excludes from this service works provided in relation to irrigation, water shed development etc. Since the Act consciously excludes "Dams" from the purview of WCS and in "Site Formation Service" works provided in relation to Ir .....

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"in respect of dams". Similarly, in respect of WCS, Notification No. 41/2009/ST dated 23.10.2009, granted exemption in respect of works contract provided in respect of canals. These Notifications, issued under Section 93 of the Act, establish that works contract in respect of canals is otherwise included within the scope of the taxable service and that execution of canals is outside the purview of "Dam", which alone is the excluded component. (vii) The definition of WCS uses .....

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efinition, it must be given a narrow construction and irrigation and canal systems fall outside the scope of exclusion. (viii) Assessees contention that where contracts involve only a package or a specified distance out of the overall project, it would not constitute an EPC/ Turnkey Project and only when the entirety of the larger project is executed by one entity it would amount to EPC/ Turnkey project, is misconceived. The definition of WCS, in clause (e) under Explanation (ii) thereof does no .....

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B); (C) and (D) : (a) WCS was introduced by the Finance Act, 2007 w.e.f. 01.06.2007 by insertion of sub-clause (zzzza) in Section 65(105) of the Act. The provision reads: Section 65 (105) (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, transports terminals, bridges, tunnels and dams. Explanation.- For the purposes of this sub-clause, "works contract" means a contract wherein .....

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t 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, or of a pipeline or conduit, primarily for the purposes of commerce or industry; or (c) Construction of a new residential complex or a part thereof; or (d) Completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in .....

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e (e) signifies a distinct category of service, distinct from those enumerated in clauses (a) to (d); or is merely descriptive of the mode of execution of taxable services comprised in clauses (a) to (d). Assessees contend that clause (e) merely describes the mode of execution of taxable services enumerated in clauses (a) to (d) and is intended to cover works contracts involving bundled services which may comprise more than one component of the taxable services enumerated in each of the clauses .....

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axable services that were in force prior to 01.06.2007. In Alstom Projects India Ltd. vs. Commissioner of Service Tax, Delhi 2011 (23) STR 489 (Tri.Del); a Division Bench of this Tribunal concluded that EPC contracts are chargeable to service tax even prior to 01.06.2007. The following observations in para 6.2 of this judgment are relevant: (2) The entry "Service in relation to execution of work contract" as defined in Section 65(105) (zzzza) is different from services defined in other .....

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tracts" involving transfer of property in goods on which Sales Tax/ VAT is chargeable. But it does not mean that these contracts were not liable to Service Tax prior to 01.06.2007 as, as discussed above, "erection, installation or commissioning services", "commercial or industrial construction service", Residential constructions services were taxable even prior to 01.06.2007, even if the same involved use/ supply of goods on which Sales Tax/ VAT was payable. Similarly in .....

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can be said that while Section 65(105)(zzzza) would cover the services defined by Section 65(105)(zzd), Section 65(105)(zzq), Section 65(105)(zzzh) and EPC contracts which involve transfer of property is goods on which tax as sale of goods is leviable, and Section 65(105)(zzd), 65(105)(zzq) and Section 65(105)(zzzh) will cover erection, installation or commissioning service, 'commercial or industrial construction services' and 'residential construction services' respectively not .....

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e extant (prior to 01.06.2007) taxable services, by employing classification guidelines set out in Section 65A of the Act. Normally, since the dominant intention underlying such a contract would be the construction of a civil structure such as a "Dam" or a canal system under a dam (and not merely the designing or planning etc., thereof), an EPC/ turnkey contract must be classified (prior to 01.06.2007), under CICS. The special Bench decision in the recent Larsen & Toubro Limited re .....

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rigation, water supply, sewerage disposal or lift irrigation facilities, the activity being not primarily for commercial or industrial purposes but for delivering the affirmative obligations of the State or a State instrumentality under the Constitution, the transaction would stand excluded from liability to tax under CICS, as not being primarily for commercial or industrial purposes. We notice that another Division Bench, in Ramky Infrastructure Limited vs. CST, Hyderabad 2013 (29) STR 33 (Tri. .....

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n goods exigible to sales tax is not involved in rendition of services defined under clauses (25b) and (97a) of Section 65 i.e. CICS and ECIS, whereas such transfer is necessarily involved in execution of works contract. This conclusion is clearly contrary to the decision of the special Bench of CESTAT in the Larsen & Toubro Limited reference (dated 19.03.2015). In para 10.6, Ramky Infrastructure Limited concludes, based on the premise that only where dams were built by an appellant in execu .....

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lusionary clause "works contract in respect of dams", indicates no requirement that works contract executions of structures ancillary or integrated into a dam project should be taken up along with construction of the main dam structure and by the same contractor, to come within the exclusionary clause. This conclusion in Ramky Infrastructure Limited is therefore, with respect, erroneous and is overruled. In para 10.8, Ramky Infrastructure Limited negated plea of the appellants therein .....

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exigible to sales tax as is the case under consideration". This conclusion is per incurium the judgment of the Supreme Court in Larsen & Toubro Limited (SC.2008), which we shall advert to in detail, later herein. In view of the special (5 member) Bench decision in the Larsen & Toubro Limited reference, it follows that a works contract is exgibile to service tax even prior to 01.06.2007. In view of Indian Hume Pipe Co. Limited ; and Alstom Projects India Limited it follows that a tu .....

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(ii) (supra)], it is clear that laying of pipelines/ conduits for transmission of water or for disposal of sewerage falls within the ambit of CICS and not ECIS; and where provided to Government/ Government undertakings and for supply of water for irrigation or consumption or for disposal of sewerage, the activity is non-commercial, non-industrial, is covered by the exclusionary clause in the definition of CICS and is not exigible to service tax. Since a turnkey/ EPC contract would inhere element .....

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dated 24.05.2010 (considered in detail in sub-para (o) infra]. For the same reasons as recorded in the preceding sub-para construction of canals for transmission of water or sewerage disposal would also be classifiable under clause (b) of the definition of WCS. Revenue, apart from relying on Ramky Infrastructure Limited has also adverted to an interim order passed in Patel Engineering Limited vs. CCE, Hyderabad-II 2014 (35) STR 235 (Tri. Bang.). Suffice to notice that this interim order records .....

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Patel Engineering Limited (supra), the appellant preferred an appeal which is pending before the High Court of A.P. wherein an interim order was passed modifying the quantum of pre-deposit to be made, reported in 2014 (35) STR 297 (A.P.) . It is also urged that an appeal is preferred against the judgment (final order) in Ramky Infrastructure Limited which is also pending before the High Court, though no particulars were provided, of the appeal preferred. We are only stating these facts for compl .....

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Ramanatha Aiyar's - The Law Lexicon : In respect of . The words 'in respect of' convey some connection or relation between the plaintiff's claim and the personal injuries that he sustained. Paterson vs. Chandwick (1974) 2 All ER 772, 775 (QBD). (Administration of Justices Act, 1970, S.32 (1)). Giving the words 'in respect of' 'their widest meaning viz. 'relating to' or 'with reference to' it is plain that this relationship must be predicated of the gra .....

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be a tax in respect of the premises or building used for the business. I.T. Commissioner vs. Chunilal, AIR 1968 Pat 364 at 367. [Constitution of India preamble] The words "in respect of" are wide enough to permit charges being made as terminals so long as any of these things, viz, station, sidings, wharves, depots, warehouses, cranes and other similar matters have been proved and are being maintained. The words "in respect of" used in S.3 (14) mean "for the provision of .....

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Excise & Customs - In respect of - (Canada). "The words 'in respect of' are, in my opinion, words of the widest possible scope. They import such meanings as 'in relation to', 'with reference to', or 'in connection with'. The phrase 'in respect of' is probably the widest of any expression intended to convey some connection between two related subject-matters". Nowegijick v. Canada [1983] 1 SCR 29, (Words & Phrases Legally Defined. Butterwo .....

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to mean 'for the provision of' and 'for the user of'. Therefore, irrespective of the actual user by any particular consignor of the stations, sidings and other things mentioned therein, terminal charges are leviable by reason of the mere fact that these things have been provided by the Railway Administration. Sahadara (Delhi) Saharanpur Light Railway v. Upper Doabs Sugar Mills Ltd. AIR 1960 SC 695: (1960) 2 SCR 926. The words in respect of are of very wide amplitude and the suit .....

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. Inland Revenue Commissioners 174 L.T. Rep. 133 calls them colourless words. This Court in S.S. Light Railway Co. Ltd. v. Upper Doab Sugar Mills Ltd. and Anr. MANU/SC/0011/1960: 1983 CriLJ1044 construing these words in Section 3(14) of the Indian Railways Act, 1890 has held that they are very wide. It seems to us that in the context of Section 23(1B) 'in respect of' has been used in the sense of being 'connected with', and we have no difficulty in holding that the currency in re .....

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ted into such deposits". If for this sub-section any property in respect of which a contravention has taken place includes deposits into which the property may be converted and can be reached even where the deposits are in a bank, it is not reasonable to think that the sale proceeds in Indian currency of any foreign exchange would be outside the scope of Section 23(1B0 and therefore not liable to be confiscation. In our opinion the High Court was wrong in quashing the order of confiscation .....

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terminals or does it, contemplate charges only for use of sidings, stations, wharves, warehouses, cranes and other similar matters? The wide enough to permit charges being made as terminals so long as any of these things, viz., stations, sidings, wharves, depots, warehouses, cranes and other similar matters have been provided and are being maintained. The question is whether the import of this generality of language should be cut down for any reason. It is well-settled that a limited interpreta .....

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ranes and other similar things will be used and it is arguable that in using the words "in respect of" the legislature had such user in mind. It is well to notice however that the legislature must have been equally aware that whereas in some cases accommodation provided by stations will be used, in some cases sidings will be used, in other wharves, in other warehouses and in other cases cranes, and in certain cases several of these may be used, in most cases there will be no use of all .....

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the provisions of depots, warehouses and cranes unless these were used, there would be no need of including these in the first portion as they would be covered by the second part of the definition, viz., "of any services rendered thereat". Far from there being any reason to cut down, the consequence of the generality of language used viz., "in respect of", there is thus good ground for thinking that the legislature used this language deliberately to cut across the difficulty .....

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us that the interminable disputes that would arise between the Railway Administration and the Railway users, if the fact of user of stations, sidings and other things mentioned had to determine the amount payable, would be unhelpful not only to the Railway Administration but also to the using public. The sensible way was therefore to make a charge leviable for the mere, provision of these things irrespective of whether any use was made thereof. That was the reason why such wide words "in re .....

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held in Hall & Co. v. London, Brighton and South Coast Rly., Co. (2), that for the purposes of interpretation of section 51 of the London, Brighton, and South Coast Rly. Act, 1863 which did not include such a definition of terminal charges, the words "any service incidental to the duty or business of a carrier", does comprise providing such station accommodation and such sidings, and such weighing, checking and labelling as is incidental to the duty which they undertake, of collect .....

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. This consideration fortifies the conclusion which we have already reached on an examination of the scheme of our own Act, apart from authorities, that the words "in respect of" used in s.3(14) in the definition of (2) (1885) 15 K.B. 505 . (vi) The Orissa High Court in Godavaris vs. Nandkisore Das AIR 1953 Ori 111; The Madras High Court in State of Madras vs. Chitturi Venkata Durga Prasadarao and Ors . AIR 1957 A.P. 675; the Patna High Court in Commissioner of Income Tax vs. Chunilal .....

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in respect of " are words of the widest possible scope and import such meanings as "in relation to", "with reference to" or "in connection with; and that "in respect of" is probably widest of any expression intended to convey some connection between two related subject matters . (vii) Board Circular No. 116/10/2009-ST dated 15.09.2009 clarified the issue regarding leviability of service tax on construction of canals for Government projects. Paras 1 and 2 .....

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y of dams, irrigation projects, buildings or infrastructure construction etc. through EPC (Engineering Procurement & Construction) mode. The said service is covered under section 65(105)(zzzza) of Finance Act, 1994. The said section itself excludes works contract in respect of dams, road, airports, railways, transport terminals, bridges & tunnels executed through EPC mode. Hence works contract in respect of above works even if done through EPC mode are exempt from payment of service tax. .....

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hereon under Section 66 of the Act. This being an exemption Notification and not having been made specifically retrospective cannot be given a retrospective connotation vide Commissioner of Customs, Bangalore vs. Spice Telecom 2006 (203) ELT 538 (SC). However, an exemption Notification per se cannot be a legitimate guide to interpretation of the scope of provisions in an Act. Revenue's contention, that since Notification No. 41/2009-ST (prospectively) exempts execution of works contract in r .....

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inition of WCS, an exemption Notification cannot negate the proper interpretation to be put upon the definition of WCS. (ix) With introduction of the negative list regime w.e.f. 01.06.2012, Section 66B of the Act is the charging provision and enjoins levy of service tax on the value of all services, other than those specified in the negative list, provided or agreed to be provided. The negative list of services is specified in Section 66D. Clause (h) of Section 66E (enumerating Declared services .....

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the service tax net. Notification No. 25/2012-ST dated 20.06.2012 was issued (w.e.f. 01.06.2012), under Section 93 of the Act (as a mega Notification), exempting a variety of taxable services from the levy of tax charged under Section 66B. Paragraph 12(d) and (e) of this Notification specify canal, dam or other irrigation works; and pipeline, conduit or plant for (i) water supply; (ii) water treatment; and (iii) sewerage treatment or disposal , as exempted from levy. (d) Revenue's contention .....

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strial purposes. (e) Board Circular No. 80/10/2004-ST dated 17.09.2004 (issued to clarify the scope of construction services introduced w.e.f. 10.09.2004) clarifies about the non taxability of civil constructions used inter alia for providing civic amenities by the Government or Government agencies - vide para 13.2 and 13.4 thereof. (f) The position then would be (if Revenue's contentions are accepted), (a) EPC / turnkey project for civil constructions in respect of dams, canal systems for i .....

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r turnkey /EPC mode) is specifically exempted from levy qua Notification No. 49/2009-ST dated 23.10.2009; and (d) w.e.f. 01.06.2012, on introduction of the negative list, construction of canals, dams or other irrigation works, pipeline conduit or plant for water supply, water treatment or sewerage treatment or disposal is exempt w.e.f. 01.06.2012 itself, vide exemption Notification No. 25/2012-ST dated 20.06.2012. (g) Nevertheless, Revenue would argue, construction of canals under EPC/ turnkey m .....

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ibunal in the reference in the case of Larsen & Toubro Limited (vide the majority judgment dated 19.03.2015) ruled that a works contract is taxable even prior to 01.06.2007 under appropriate existing taxable services identified by applying the relevant classification guidelines. Laying of pipelines for transmission of water or sewerage does not amount to ECIS but falls within the ambit of CICS, is the principle settled by the Tribunal decisions in Indian Hume Pipe Co. Limited ; A. Sekar ; Di .....

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clusionary clause in Section 65(25b), defining the scope of CICS, since the activity would not primarily be for industrial or commercial purposes. (i) W.e.f. 01.06.2007 the question then arises, whether turnkey / EPC projects for execution of canals under dams for transmission of water for irrigation of drinking water purposes or laying of pipelines again for transmission of water for irrigation of drinking water purposes as in the case of lift irrigation systems or for sewerage disposal is taxa .....

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during 01.06.2007 to 23.10.2009. (j) Para 3 of Board Circular No. 116/10/2009 dated 15.09.2009 clarified that works contract in respect of dams, roads, airports, railways, transport terminals, bridges & tunnels even if executed through the EPC mode is exempt from tax in view of the definition of WCS in Section 65(105)(zzzza). Whether construction of canals or pipelines/conduits for transmission of water by gravity or in lift irrigation systems as the case may be ought be interpreted as a wo .....

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ms under works contract not a works contract in respect of dams? On a true and fair construction of the definition of WCS (extracted in the preceding sub para), the provision employs the expression "in respect of ........ dams" as an activity excluded from the scope of the levy. Earlier in the analyses herein we have noticed that the expression "in respect of" is an expression having a wider connotation and bears the widest possible scope. The decision in S.S. Light Railway C .....

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a wide connotation and compass. The Canadian Supreme Court in Nowegijick (supra) explains that "in respect of" are words of widest possible scope and import such meaning as "in relation to", "with reference to", or "in connection with". (l) Canals construction, in particular for transmission of water for irrigation or drinking water purposes including where such canals are under a dam; or the laying of pipelines for conveyance of water for irrigation or d .....

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rvice ECIS defined in Section 65(39a). Clause (b) is drawn from essential elements of CICS defined in section 65(25b), in particular, sub-clauses (a) and (b) thereof. Clause (c) under Explanation (ii) of the WCS definition is drawn from the definition of COCS, in particular sub-clause (a) thereof. Clause (d) of WCS is substantially an extract of clauses (c) & (d) of the definition of CICS and COCS in Section 65 (25b) and (30a), respectively. (n) In view of the decision in Alstom Projects Ind .....

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ntended, when introducing clause (e) in Section 65(105)(zzzza), to treat EPC/ turnkey projects as a new species of work contract after 01.06.2007? (o) To clarify and resolve disputes that had arisen in several parts of the country regarding taxability of the different activities, taking into account the scope of related taxable services such as site formation, CICS, ECIS or WCS as well as new services introduced by Finance Act, 2010, the Board issued a clarificatory Circular No. 123/5/2010-TRU d .....

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ctivities undertaken, that distinguishes it from the previously stated taxable services. Thus, even in the case of 'works contract' if the nature of the activities is such that they are excluded from aforesaid two services then they would generally remain excluded from this taxable service as well. From this clarification, it follows that since construction of canals is for irrigation, water supply or pipelines/ conduits for lift irrigation, water supply or sewerage disposal, such contra .....

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tent with the legislative intention underlying the enactment of WCS as a distinct taxable service, with elements drawn from pre-existing taxable services such as ECIS, CICS and COCS. Revenue has not contended before us that this clarification by the Board is inconsistent with the provisions of the Act and therefore of no legal consequence or force. (p) As earlier noted, prior to 01.06.2007 construction of canal systems or pipelines/ conduits for Government/ Government undertakings for transmissi .....

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provision itself, exemption Notification No. 41/2009-ST should be considered as issued under a misconception that construction of canals under a dam though not primarily for purposes of commerce or industry is nevertheless taxable, which it is not. (q) We are thus left with the activity of construction of pipelines/ conduits under the turnkey / EPC mode. When the construction is for Government/ Government undertakings and for water supply or sewerage disposal purposes, prior to 01.06.2007 this a .....

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ment/ Government undertakings for transmission of water or sewerage would be outside the ambit of levy of tax, in terms of the definition itself, since this would undisputedly fall within the ambit of sub-clause (b) of WCS. (r) What then could be the legislative intention in not excluding levy on construction of a pipeline or conduit when executed under a turnkey/ EPC mode. Revenue does not explain this incongruity while contending that works contract executed under turnkey/ EPC project mode eve .....

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ICS or under site formation and clearance, excavation earthmoving & demolition service. The Tribunal ruled that such activity undertaken by the assessee was preparatory to construction of a reservoir and other civil works and is therefore outside the purview of site formation service. The relevant paragraph of this decision reads: "6. We find that Engineering, procurement and Construction contracts were signed by the appellant for construction of Major Ground Balancing Reservoir, for ra .....

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preparing of further construction of reservoir and other civil works. We therefore are of the view that these activities undertaken by the appellant are out of purview of Site Formation, and Clearance Excavation and Earthmoving and Demolition Service as defined under Section 65(97a) of the Act ". (emphasis supplied) (t) In Dr. Lal Path Labs Pvt. Ltd. vs. CCE, Ludhiana 2006(4) STR 527 (Tri. Del.); it was held that once there is a specific entry for an item in the tax code, the same cannot be .....

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principle that what is excluded under one entry (category) cannot be taxed under another was reiterated in respect of outbound roaming service under Telecommunication Service. The issue was whether services provided by a foreign telecom service provider could be taxed under Business Auxiliary Service (BAS) since it is not taxable as Telecommunication Service as a foreign telecom service provider is not a Telegraphic Authority as per Indian law. Board circulars dated 15.07.2011 and 19.12.2011 cla .....

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; contracts. The expression "EPC/ turnkey" was used in the relevant contracts. Revenue assumed that "EPC" is a species of the genus "turnkey". This assumption by Revenue is predicated on the basis of clause (e) in the definition of WCS, which reads: Turnkey projects including Engineering, Procurement and Construction or Commissioning (EPC) projects. Neither "turnkey" nor "Engineering, Procurement and construction or Commissioning EPC" is defined. .....

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to a client (who has merely to "turn the key" and take over the package) . ii) MacGraw - Hill-Dictionary of Scientific and Technical Terms - Turnkey contract: A contract in which an independent agent undertakes to furnish for a fixed price all materials and labour, and to do all the work needed to complete a project . iii) Black's Law Dictionary (Fifth Edition) - Turnkey contract: Term used in building trade to designate those contracts in which builder agrees to complete work of .....

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#39; or 'EPC)' places the duty to design and construct solely on the contractor. There is no accepted definition for each of these terms in the construction field . v) Black's Law Dictionary (Eighth Edition) - Engineering, Procurement and Construction Contract (EPC) contract - A fixed price, schedule - intensive construction contract - typically used in the construction of single -purpose projects, such as entry plants - in which the contractor agrees to a wide variety of responsibil .....

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, it is clear that EPC contracts are synonymous and are referred to as turnkey contracts as well. Now we consider whether the word "including" employed in clause (e) under Explanation (ii) of the definition of WCS must be construed in an expansive or a restrictive sense. (i) The word "includes" is generally used in interpretation or definition provisions in order to enlarge the meaning of words or phrases occurring in the body of the provision. When so used these words or phr .....

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t;includes" must be interpreted as indicating "mean and include"; and in such a case the word indicates an exhaustive explanation of the meaning of the words and phrases in the provision which, for the purposes of the provision must invariably be attached to those words or phrases. Ordinarily "includes" indicates that what follows this word is comprised or is contained in the whole of the words or phrases preceding and the nature of the included terms would not only part .....

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ntention, restrictive and exhaustive. The Court observed: Though 'include' is generally used in interpretation clauses' as a word of enlargement, in some cases the context might suggested a different intention. Pottery is an expression of very wide import, embracing all objects made of clay and hardened by heat. If it had been the legislature's intention to bring within the entry all possible articles of pottery, it was quite unnecessary to add an Explanation. We have found that .....

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. It seems to us that the word 'includes' has been used here in the sense of 'means', this is the only construction that the word can bear in the context. In that sense it is not a word of extension, but limitation; it is exhaustive of the meaning which must be given to potteries industry for the purpose of entry 22. The use of the word 'includes' in the restrictive sense is not unknown. The observation of Lord Watson in Dilworth v. Commissioner of Stamps (1899) A.C. 105, .....

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of the meaning which, for the purposes of the Act, must invariably be attached to these words or expressions". It must therefore be held that the manufacture of Mangalore pattern roofing tiles is outside the purview of entry 22. (emphasis added) (iv) The significance of the word "includes" was again considered in the context of Prize Chits and Money Circulation Schemes (Banning) Act, 1978, 1978, in Reserve Bank of India vs. Peerless General Finance and Investment Co. Ltd. and Ors .....

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quot;include" is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute; and when it is so used these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include. But the word "include" is susceptible of another construction, which may become imperative .....

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a Pradesh v. Taj Mahal Hotel [1971] 82 ITR 44 (SC) and S.K. Gupta v. K.P. Jain [1979] 4 SCC 54. 36. We do not think it necessary to launch into a discussion of either Dilworth's case or any of the other cases cited. All that is necessary for us to say is this: Legislatures resort to inclusive definitions (1) to enlarge the meaning of words or phrases so as to take in the ordinary, popular and natural sense of the words and also the sense which the statute wishes to attribute to it, (2) to in .....

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refunding of money. The word 'includes', the context shows, was intended not to expand the meaning of 'prize chit' but to cover all transactions or arrangements of the nature of prize chits but under different names . (iv) In the context of Entry 62 of List II of the Seventh Schedule of the Constitution, the Supreme Court in Godfrey Phillips India Ltd. and Anr. Vs. State of U.P. and Ors . (2005) 2 SCC 515 considered whether "includes" could in certain contexts be a word .....

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od as meaning something which is purely for enjoyment and beyond the necessities of life, there can be no doubt that entertainments, amusements, betting and gambling would come within such understanding. Additionally, entertainments, amusements, betting and gambling are all activities. 'Luxuries' is also capable of meaning an activity and has primarily and traditionally been defined as such. It is only derivatively and recently used to connote an article of luxury. One can assume that th .....

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rds, and particularly general words, cannot be read in isolation; their colour and their content are derived from their context, A-G v Prince Ernest Augustus of Hanover (1957) AC 436, per Viscount Simonds, at 461." 71. Put in other words the included words may be clarificatory or illustrative of the general word. Thus in U.P. State v. MANU/SC/0273/1966: Raja Anand; [1967] 1 SCR 362, while construing Article 31A (2) as enacted by the Constitution (Seventeenth Amendment) Act, 1964 the relevan .....

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tructures occupied by cultivators of land, agriculture labourers and village artisans; this Court said:- "In our opinion the word "including" is intended to clarify or explain the concept of land held or let for purposes ancillary to agriculture. The idea seems to be to remove any doubt s on the point whether waste land or forest land could be held to be capable of being held or let for purposes ancillary to agriculture". 72. In the present context the general meaning of ' .....

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le that interpretation of a word or expression must depend on the word and the context. The resort to the word "includes" often indicates intention of the Legislature that it wanted to give an expansive and enlarged meaning to such expression. Sometimes, however, the context may suggest that the word "includes" may have been designed to mean "means". The setting, context and object of an enactment would provide sufficient guidance for interpretation of the word &quo .....

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s "turnkey contracts" as well, we conclude that in clause (e) under Explanation (ii) of the definition of WCS, turnkey projects and EPC projects are employed to signify similar, not dissimilar transactions, to indicate contracts in which a builder agrees to execute the whole of the enterprise awarded to him and if the agreement so provides from the stage of design and planning till execution and completion of the whole work entrusted; and undertakes wide variety of other responsibiliti .....

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eline project is not entrusted, the transaction does not amount to a "turnkey or EPC project". Counsel further contended that unlike works contract services enumerated in clauses (b) and (c) in the definition of WCS, clause (e) does not indicate that a part of a turnkey or EPC project would also be taxable. The textual basis of this contention is not in dispute. While clauses (b) and (c) enumerate certain types of WCS (specified therein) and enact that the specified service or a part t .....

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ovision, intended to embrace genres of works contract which contain elements other than those indicated in each of the clauses (a) to (d) and which may include elements of other services as well, bundled into a comprehensive contractual exertion, agreed between the parties to be executed. We have also ruled that even an EPC /turnkey contract must be classified to identify the services embedded therein which gives the contract its essential character; and on such ascertainment of the essential ch .....

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[Issues (B), (C) & (D)], we advert to other contentions advanced by Shri V. Sreedharan. Counsel contends that the contracts in issue are single, indivisible agreements whereby the transfer of property in goods involved in the execution thereof does not pass to the employer as soon as goods are brought to the site by the contractor. The transfer property in the goods takes place only when these are incorporated into the construction and get transformed as immovable property i.e. the property .....

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to (i) a divisible works contract (where distinct and separate contracts are entered into), whether in one or more instruments, one for the transfer of the goods qua goods, for consideration and the other for rendition of services or work done; or (ii) to an indivisible works contract with a material vesting clause (where no separate agreement for the sale of material exists but there is a term in the composite agreement that the title to the material or goods would pass to the employer as soon .....

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iable to tax as sale of goods . According to Counsel since there is no transfer of property in goods qua goods but in some other form i.e. by accretion or transformation as immovable property on incorporation, such transactions are not intended to fall within the scope of WCS. (ii) Revenue has not responded to this contention of Shri Sreedharan, either in its oral or written submissions. We are however of the view, for the analyses to follow, that this contention does not merit acceptance. (iii) .....

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osite contract where the title in the goods passes to the employer on incorporation / accretion to the immovable property (i.e. does not pass as soon as goods are brought to the site by the contractor but only on incorporation / accretion), would such a transaction be exigible to sales tax? (v) This question is no longer res-integra . It stands concluded by the decision in Larsen & Toubro Limited vs State of Karnataka (2014) 1 SCC. 708. (vi) One of the issues considered by the Supreme Court .....

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nditions must be fulfilled: (one) there must be a works contract, (two) the goods should have been involved in the execution of a works contract and (three) the property in those goods must be transferred to a third party either as goods or in some other form. (ii) For the purposes of article 366 (29A)(b), in a building contract or any contract to do construction, if the developer has received or is entitled to receive valuable consideration, the above three things are fully met. It is so becaus .....

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(29A)(b) takes within its fold all genre of works contract and is not restricted to one specie of contract to provide for labour and services alone. Nothing in article 366 (29A)(b) limits the terms "works contract". (vii) In view of the above ruling in Larsen & Toubro Limited, it is clear that even where goods are procured by a contractor and incorporated into a construction whereupon such goods get transformed into immovable property and the property in such goods passes to the e .....

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oticed, is inter alia defined to mean "a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods". In drafting the definition of WCS and in structuring the aforesaid definition the draftsman is seen to have employed a shorthand incorporating the post 46 th amendment accretion of legislative powers in Entry 54 of List II, expanding States power to levy sales tax on deemed/ accretion sale of goods as well. The mere omi .....

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n the above analyses, contentions of Shir Shreedharan do not commend acceptance. We reject the same. We hold that even in works contract where the transfer of property in goods involved in the construction of a building or civil structure passes by accretion, the transaction is exigible to service tax under Section 65(105)(zzzza). 19. On the aforesaid analyses we hold [on issues (A), (B) & (C)] that construction of canals under a dam for transmission of water or sewerage; or construction of .....

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nary clause in clause (b) of WCS definition; and (iii) construction of canals, pipelines or conduits for transmission of water including by lift irrigation would be, when these works are conceived as integrated to a dam project, works contract "in respect of a dam" and thereby excluded from the purview of WCS. 20. Issue (E) : To recapitulate, the issue is, where the whole of the work is sub-contracted; and in the hands of the main contractor there occurs no transfer of property in good .....

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laced orders on sub-contractors and the overall work was done by sub-contractors. The sub-contractors purchased goods and chattel like bricks, cement and steel and erected the structures. An assessment order was passed against the contractor for levy of sales tax in respect of goods deemed to have been sold by it to the contractee. The adjudicating authority concluded that there were two deemed sales, one from the assessee (contractor) to the principal employer (contractee) and the other from th .....

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t;incidence, levy and calculation of tax". In this case, we are concerned with the taxability of works contract. That subject is dealt with by section 4(7) of the said 2005 Act. In our view, section 4(7) is a code by itself. It begins with a non obstante clause. It, inter alia, states that every dealer executing a works contract shall pay tax o the value of goods at the time of incorporation of such goods in the works executed at the rates applicable to the goods under the Act. The point to .....

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each of the sub- contractors of L & T is registered dealer. None of them are unregistered. Under section 4(7)(a) read with rule 17(1)(c), quoted above, where a VAT dealer awards any part of the contract to a sub-contractor, such sub-contractor shall issue a tax invoice to the contractor for the value of the goods at the time of incorporation in such sub-contract. The tax charged in the tax invoice issued by the sub-contractor shall be accounted by him in his returns. Therefore, the scheme in .....

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o claims to have paid taxes under the Act on the goods involved in the execution of the works. Once the work is assigned by L & T to its sub-contractor(s)., L & T ceases to execute the works contract in the sense contemplated by article 366 (29A)(b) because property passes by accretion there is no property in goods with the contractor which is capable of a retransfer, whether as goods or in some other form. The question which is raised before us is whether the turnover of the sub-contrac .....

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the contrary in the case of works contract the property in the goods used in the construction of a building passes to the owner of the land on which the building is constructed, when the goods used are incorporated in the building". (emphasis supplied by us) As stated above, according the Department, there are two deemed sales, one from the main contractor to the contractee and the other from sub-contractor(s) to the main contractor, in the event of the contractee not having any privity of .....

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property in goods. It is subject to the contract to the contrary. Thus, in our view, in such a case the work executed by a sub-contractor, results in a single transaction and not multiple transactions. This reasoning is also borne out by section 4(7) which refers to value of goods at the time of incorporation in the works executed. In our view, if the argument of the Department is to be accepted it would result in plurality of deemed sales which would be contrary to Article 366 (29)(b) of the Co .....

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f the works awarded (under terms of the agreement which authorised such sub-contracting); and the incorporation of goods into the construction/ structures was by the sub-contractor and not by an appellant, there is no rendition of WCS by such appellant, which is taxable under Section 65(105)(zzzza). In Table (A) in para 10 (supra) we have set out particulars of appeals where (according to appellants) the works was assigned wholly to sub-contractors and there was no rendition of works contract by .....

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eals by the appropriate Bench dealing with them on merits. On issue (E) we conclude, on the basis of the judgment in Larsen and Toubro Ltd. (SC-2008) that where under an agreement (whether termed as a works contract, turnkey or EPC project contract), the principal contractor, in terms of the agreement with the employer/ contractee assigns the works to a sub-contractor and the transfer of property in goods involved in the execution of such contract passes from the sub contractor by accretion to o .....

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ssociated activities like trenching, soil preparation and filling, supporting masonry work, jointing of pipes, electro-mechanical works or pumping stations and like activity, is classifiable only under Commercial or Industrial Construction Service (CICS) for the period upto 01.06.2007 and not under Erection, Commissioning or Installation Service (ECIS); (b) Issues (B); (C) and (D) : (i) Construction of canals for irrigation or water supply; construction or laying of pipelines/ conduits for lift .....

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sion in Alstom Projects India Ltd ., fortified by the Special Bench decision (dated 19.03.2015) in Larsen & Toubro Ltd. reference, a turnkey/ EPC contract is taxable prior to 01.06.2007 as well. On and since 01.06.2007, turnkey/ EPC contracts must be classified on the basis of the essential character of the service provided thereby, with the aid of classification guidelines set out in Section 65A(2) of the Act. Consequently, a turnkey/ EPC contract must be classified under any of the clauses .....

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