TMI Blog2019 (1) TMI 380X X X X Extracts X X X X X X X X Extracts X X X X ..... im in the impugned orders. Related to this question, exigibility of the services rendered by the appellant post 01.06.2007 in terms of Sec.65(105)(zzzza) of the Finance Act, 1994 this is also an issue which was not examined by the adjudicating authority while passing the impugned orders. Hence, this needs to be examined before the appeal can be considered by this Bench. Whether the appellant would be eligible for exemption N/N. 12/2003- ST? - Held that:- We agree with the learned department representative that any exemption notification should be strictly construed. The appellant had produced only documents to show that they have purchased materials but nothing to show that they have used the same in execution of the contracts and it is for this reason the adjudicating authority did not allow the abatement under this notification - Nevertheless when a demand of duty is being made in the show cause notice which cannot sustain if the services are not exigible to Service Tax at all and this issue needs to be examined. This is a fit case to be remanded back to the original authority to enable them to examine the matters and pass a reasoned order, after following principles of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This involved not only repair but also use of new steel sheets whose ownership gets transferred to the service recipients. Thus the services are in the nature of composite, indivisible work contracts involving transfer of property of the materials as well as rendering necessary services. The bills were also raised on indivisible work contract basis. They had sought benefit of exemption notification 12/2003-ST which exempts so much of the value of all taxable services as is equal to the value of the goods and materials sold by the service provider to the recipient of the service. Based on the amount of material which they used they have claimed an abatement of 60%/70% of the total invoice value. The position of the department is that they have not produced any evidence to show that the goods have been sold to the service recipient. Before the adjudicating authority, they had produced documents showing the full value of the materials which they have purchased for execution of the contracts and claimed abatement. However, the adjudicating authority denied abatement holding that they have only produced evidence of what they purchased and not what they used in execution of contracts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the prescribed manner. 26. We have already seen that Rule 2(A) framed pursuant to this power has followed the second Gannon Dunkerley case in segregating the service component of a works contract from the goods component. It begins by working downwards from the gross amount charged for the entire works contract and minusing from it the value of the property in goods transferred in the execution of such works contract. This is done by adopting the value that is adopted for the purpose of payment of VAT. The rule goes on to say that the service component of the works contract is to include the eight elements laid down in the second Gannon Dunkerley case including apportionment of the cost of establishment, other expenses and profit earned by the service provider as is relatable only to supply of labour and services. And, where value is not determined having regard to the aforesaid parameters, (namely, in those cases where the books of account of the contractor are not looked into for any reason) by determining in different works contracts how much shall be the percentage of the total amount charged for the works contract, attributable to the service element in such contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the services rendered by them viz., maintenance and repair of ships is not covered under this heading. He would, therefore, submit that even after 01.06.2007 they do not fall in the net of service tax as they have rendered services in the form of indivisible works contract which are not covered in the charging section of the Finance Act, 1994. He fairly submits that these issues are being agitated now and were not taken up earlier. In fact, they have not even contested the liability of service tax before the audit or during subsequent legal proceedings because the judgment of the Hon ble Supreme Court came much later. He would say that nevertheless if their service was not exigible to service tax during the relevant period, they cannot be burdened with the tax even if they had not contested the same during the relevant period. He would also argue on the following other points. 1) The adjudicating authority has not considered their submissions and has not given findings on the same. 2) The adjudicating authority has travelled beyond the scope of show cause notice. 3) In case of ship repairing value of material used is always more than the value of services and this fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty has travelled beyond the scope of the show cause notice. In fact, the arguments of the learned counsel for the appellant that the contracts which they have entered into are works contracts and not exigible is beyond the scope of show cause notice as well as their submissions in the previous legal proceedings of the case. 3) Regarding the argument of the appellant that there is no allegation in the show cause notice as well as the impugned orders that the entire amount is towards service, the learned departmental representative draws the attention of the Bench to Para 6,9 10 of the show cause notices and submits that the abatement claimed by the appellant is on account of consumables used for provision of service and there is no sale of goods so as to be eligible for benefit of notification 12/2003-ST. 8. We have considered the arguments on both sides and perused the records. The issues that fall for consideration are as follows. a. Whether the appellant had entered into composite works contracts involving supply of materials as well as rendition of necessary services in these contracts? b. If so, whether these were exigible in view of the judgment of the Hon ble Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e show cause notice and find it so. Nevertheless when a demand of duty is being made in the show cause notice which cannot sustain if the services are not exigible to Service Tax at all and this issue needs to be examined. 10. In view of the above, we find this is a fit case to be remanded back to the original authority to enable them to examine the following and pass a reasoned order, after following principles of natural justice. A. Whether in terms of the judgment of the Hon ble Supreme Court in the case of Larsen Toubro Ltd (supra) the services rendered by appellant were exigible prior to 01.06.2007. B. Whether the services rendered by the appellant post 01.06.2007 were exigible in terms of Sec.65(105)(zzzza). C. If the services rendered are found exigible to service tax the amount of abatement which the appellant is entitled to under notification 12/2003-ST. 11. We know that the 3rd question was examined earlier by the adjudicating authority and no abatement was given on the ground that appellant have not submitted details of the materials used in the execution of the contract which the learned counsel now submits that they will be able to provide. 12. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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