TMI Blog2006 (3) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... Process Design, Detailed Engineering, Procurement, Supply. Construction, Erection, Installation, Testing Commissioning and Mechanical Guarantee of the said Units. The Lump sum Price offered by the said assessee against the work of Turn Key Project for the said units of Digboi Refinery are as follows: Sr. No. Description Price Contract No. PROJ/ SDU/DR/53 of PROJ/HDT/DR/54 of 1. Lump sum price for Residual Process Design and detailed Engineering Rs. 9,00,90,000/- Rs. 8,31,60,000/- 2. Lump sum price for Supply portion Rs. 51,54,16,100. /- Rs. 54,64,00,000/- 3. . Lump sum price for Construction installation portion Rs. 38,36,24,000/ Rs. 35,21,04,000/- The above lump sum prices offered by the said appellant have been accepted by M/s. Indian Oil Corporation Ltd. (Assam Oil Division), Digboi vide their letter Ref. No. SDU/CON/02 and HDT/CON/03 respective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of service is separately mentioned in the contract/ agreement. In fact the agreement itself is an agreement for supply and services. There is no need to vivisect the contract to ascertain service. In the billing also the supply portion is separately billed and service portion is separately billed. The agreement very specifically mentions the scope of service as well as the supply. It was accordingly submitted .that when in a work contract the charges for the service have been separately and clearly mentioned it would cease to be an individual work contract and there shall be absolutely no dispute about the liability to service tax of the taxable services provided in course of execution of the work contract. In view of this the order of Commissioner (Appeals) was contrary to the facts of the case. 9. The learned SDR invited attention to the details of the contract wherein the break up, the lump sum price for residual process design and detailed engineering was given separately as compared to lump sum price for supply portion and lump sum price for construction/installation portion. It was submitted that it was only in respect of the lump sum price for residual process design an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and will be chargeable to service tax. 11. Besides above it was submitted that the dispute in the Associated Hotel's case pertained to the period prior to 46th amendment of the constitution and the Supreme Court on the basis of constitutional provision during that period held that the revenue was not entitled to split the transaction into two portions, one of service and the other of sale of food stuff with a view to subject the latter to the sales tax. This judgment has become irrelevant after 46th amendment of the constitution by which article 336 (29A) of the constitution of India was amended so as to enlarge the scope of entry 54 of List II of 7th Schedule of the Constitution tax on sale or purchase of goods, to include tax on transfer of property in goods (whether as goods or in some other form) involved in execution of a work contract . Therefore, the argument that the work contract cannot be vivisected and a part of it subject to tax is no longer valid. Moreover, Supreme Court in its judgment in the case of W/s. Associated Hotels relied upon by the Tribunal in its judgment in case of W/s. Daelim Industrial Co. Ltd. has upheld that an implied contract for supply of go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld by the Supreme Court. However, since service tax is levied by Central Government under the residual entry where it has powers to tax service, whether it has been rendered in course of execution of work contract or otherwise for this purpose a deemed definition like the one in case of sales tax is not necessary. 14. Reference was also invited to Board's Circular vide F.No. 49/11/2002 -ST dated 18.12.2002 [reported in 2002 (53) RLTM145] wherein it has been clarified, that a turnkey project for construction of flats, administrative building involve etc. involve a lot of preparatory work is required e.g. soil testing, survey, planning design, drawing etc. and once the design and drawing are completed by the construction company it always seeks the approval of the client before proceeding with the construction. If the client suggests some changes they incorporated in the design. This portion of the work is provided to its client and the service is definitely of a 'consultancy engineer' and hence taxable it was accordingly submitted that the instant case is fully covered by the Board's circular and therefore the drawing and detailed engineering charges will be subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in Daelim Industrial Co. Ltd. case cited supra. 19. It was submitted that their case is squarely covered by the Tribunal's decision in the case of Daelim Industrial Co. as the facts are identical. He contested the learned SDR's claim that the service tax has been demanded only on process design and detailed engineering price and submitted that in the assessment order the tax has been demanded for the whole of the contract price which besides residual process design and detailed engineering also include the lump sum price for supply portion and for construction and installation portion. A great emphasis has been laid on the fact that there was a separate demarcation of price for residual process design and detailed engineering including the fact that the price included the service tax payable. It was submitted that the price break up was only for the purpose of billing schedule or control of cash flow. There was no agreement between the parties for rendering the service of design and engineering for specific price as a stand alone activity. In case of respondent, there was no understanding for separate services for design and engineering divorced from the main contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Railways Board Vs. Customs and Excise Commissioner [1977] STC 221 [sale of identity card for an amount to a stud which entitles him to purchase rail ticket at concessional rate subsequently is advance payment for rail transport and nor for sale of goods. The essence of transaction has to he seen] (ii) British Airways Plc Vs. Customs and Excise Commissioners. [1990] STC 643 [There is no two supplies of services one of in-flight catering and other of air transport. It is a single supply of air transport serving Service of food is not an aim for the passenger in itself but for better enjoyment of the main service of air transport. Whether it is necessary for the main supply is not a relevant question] (iii) Card Protection Plan Ltd. Vs. Customs and Excise Commissioners [1999] STC 270 ECJ and Card Protection Plan Ltd. Vs. Customs and Excise Commissioners [2001] STC 174 HL [There was a single supply where one or more elements constituted the principal service and others were merely ancillary, in that they did not constitute for customers aims in themselves, but simply a means of better enjoying the principal service. What constitutes a single supply in economic sense should not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 (174) ELT 322 Tri). The Hon'ble Supreme Court has dismissed the Department's SLP in Commissioner Vs. Daelim Industrial Co. Ltd - 2004 (170) ELT A18l (SC). In Elecon Engineering Company Ltd. Vs. Union of India, 2005 (182) ELT 148 (Guj.), the Hon'ble Gujarat High Court followed the ratio of the decision given in Daelim case (supra) and Larsen Toubro (supra) cases In Ircon International Ltd. Vs. CCL, Mumbai, 2005 (71) RLT 417 (CES TAT-Del ) = 2005 2 STT 264 (New Delhi-CESTAT), the Hon'ble CESTAT has held that construction contracts cannot be subjected to service tax as consulting engineer service, either a whole or in part and further observed that this position remains covered by the decision in the case of Daelim case (supra). 23. As regards 46th constitution amendments it was submitted that it defines tax on sale or purchase of goods an expression appearing in the constitution in the constitution in the context of levy of sales tax. This has no impact on laws other than laws on tax on sale or purchase of goods. The amendment has introduced the context of deemed sales. It does not alter the meaning of sale in the Sale of Goods Act or other enactment, includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e category or the other is to as what is 'the substance of the contract'. We will, for the want of a better phrase, call this the dominant nature test. 25. There is nothing in the Supreme Court decisions in the case of Builders' Association of India and Others Vs. Union of India, (1989) 2 SCC 645 and Gannon Dunkerley and Co. and Others Vs. State of Rajasthan and Others (1993) I SCC 364 which supports the appellant's stand that an individual works contract can be divided for the purpose of levying service tax. All the observation of the Supreme Court in these two cases are confined to the purpose of sales tax. 26. The judgment in the case of Kerala Colour Lab Association Vs. UOI, 156 ELT 17 is not against the Respondents. In that, the Hon'ble High Court simply disregarded the aspect of works contract and decided on the basis that the entire activity of the assessee as it answers the description of taxable photography service. In the case of the Respondents, the construction of a plant on turnkey basis is the service. Such service is not taxable at present. 27. In Rolls Royce Indus. Power (India) Ltd. Vs. CCE, 2004 (171) ELT 189, the Hon'ble CESTAT he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s design, detailed engineering was only incidental without which the contract could not have been completed and therefore the contract cannot be vivisected so as to charge service tax on the services rendered in respect of residual process design and detailed engineering. 30. As regards Petrofac, it was submitted that the facts are identical except that in this case even the amount of service tax said to be included in the lump sum price relating to residual process design and detailed engineering was not quantified. It was submitted that the entire arguments will in to be applicable to this case also. 31. We have considered the submissions made by both the parties. We find that facts of the present case are squarely covered by the Tribunal decision in the case of Daelim industrial Co. cited supra and the department's SLP in the case of Daelim Industrial Co. has been dismissed by the Apex Court. Further the decision of the Daelim Industrial has been followed by this Tribunal in the case of M/s. L T Ltd. Its ratio has also been referred to by the Gujarat High Court in the case of Elecon Engineering Co. Ltd. Vs. Union of India ELT 148 (Gujarat H. C.). Further, in Ircon In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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