TMI Blog2018 (2) TMI 1054X X X X Extracts X X X X X X X X Extracts X X X X ..... clusion that the intended purpose of both the parties is the supply and erection of raw water piping and pumping system. While examining the two contracts now contested in the present appeals, we note except for substitution of the word “contractor” for “supplier” the warranty or defects liability condition mentioned in Clause 34 of both the agreements are identical. It clearly establishes that as the supplier and contractor is one and the same the warranty and defect liability is to be on the appellant without any distinction for supply contract or erection contract. The defect liability clause in labour contract also talks about “defect in material”, “bad materials”. Materials are supplied in terms of supply contract which also carries same terms. This alongwith the scope of coordination agreement clearly reveals that the scope of composite works contract is clear and should be read together for the purpose of service tax. Composition scheme for works contract - concessional rate of duty - Held that: - If the erection contract is only a service contract there is no question of availing composition scheme available to works contract service. In fact, the appellants later sw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract executed by the appellants for the purpose of discharging service tax. 2. The Original Authority adjudicating 3 show cause notices issued to the appellant, held that the appellants are required to discharge their service tax liability on the aggregate gross amount received which will include amounts for erection work as well as amount for supply of materials which were erected. He held that the appellant executed a composite works contract and the gross value should have been arrived at including the value of material used in the such contract and the value of service (labour) involved in such contract. He held that though the appellant has contested that there were two separate agreements for supply of materials and for execution of work, it is clear from the coordination contract and the terms of these contracts that these work executed by the appellant is composite and the sub-contracts for supply of material and execution of work has no bearing in valuation of such composite works contract. 3. The learned Counsel contesting the finding on the impugned order submitted that in respect of raw water piping and pumping system they had entered into two contracts, both dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are the common purpose of execution of raw water piping and pumping system comprising of 184 kms. long pipeline for Lignite Thermal Power Station at Bardesh, Barmer. The terms of the contracts make it clear that both the parties intended a common work and the so called supplier and erection contractor being one and the same the coordination agreement brings out the facts clearly. There are set of technical specifications pertaining to both the contracts which are identical. Further, the learned AR submitted that even while discharging service tax on the erection contract, the appellants opted for composition scheme. It is contrary to the claim of the appellant themselves. If the erection contract is a pure service contract there is no question of paying service tax under composition scheme meant for works contract which should be a composite contract. When this matter was investigated the appellant abruptly switched over to payment of full rate of duty on the erection contract. This, apart from indicating the intention of the appellant, clearly shows such switch over itself is not legally permissible. The learned AR strongly contended that the whole issue is regarding the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, carrying out performance guarantee tests of the Equipment details of which have been seen in the RAW WATER PIPING PUMPING SYSTEM Erection Contract . (D) The Contractors agree that the Contracts require to be performed in coordination to ensure the smooth delivery, installation and operation of the Equipment . 9. The said coordination agreement readwith the supply/erection contracts leads to an apparent conclusion that the intended purpose of both the parties is the supply and erection of raw water piping and pumping system. Both the appellant and the recipient of service belong to O.P. Jindal Group of Companies as recorded in the impugned order. The Original Authority examining the overall scope of the arrangement recorded as below :- 48. In other words, there is a single Co-ordination Agreement dated 30/08/2007 between the assessee/noticee M/s Raj West Power Ltd. in respect of the complete project viz., Raw Water Piping Pumping System which includes supply of material erection work. Further, there is a set of Technical Specifications pertaining to both the contracts which is referred as Section III to the supply contract and the erection c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduction except for the of words contractor or supplier were suitably substituted. On overall examination the facts and circumstances of the case, we are in agreement with the findings recorded by the Original Authority regarding the composite nature of contract executed by the appellant and the valuation method that should be followed for discharging service tax liability. 11. It is relevant to note even while discharging service tax on the erection contract, the appellant chose to pay concessional rate by availing composition scheme for works contract. This is contrary to their basic claim that there is a separate supply contract for materials and a contract for pure service. If the erection contract is only a service contract there is no question of availing composition scheme available to works contract service. In fact, the appellants later switched over to payment of service tax with full rate without composition. This clearly reveals that action of the appellant is with full knowledge of the legal implication of the course of action for discharging service tax by them. 12. The appellants contested the demands on limitation. We have perused the impugned order on this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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