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TMI Blog2019 (2) TMI 1037X X X X Extracts X X X X X X X X Extracts X X X X ..... te, transit & storage insurance, loading, unloading and handling and storage at site, construction, stores management, project management, civil works, electrical works, mechanical works, I&C works, erection, testing, commissioning and performance tests, initial operation, putting into successful commercial operation and handing over of the complete balance of plant (BOP) systems for the thermal power plant. The letter of intent issued by APPDCL required the appellant to sign four contracts as follows: a) Offshore Supply of Plant & Equipment and essential spares. b) Onshore supply of Plant & Equipment and essential spares. c) Onshore services including supply of structural steel, civil works, erection and commissioning. d) Umbrella agreement integrating off-shore, on-shore services contracts. 2. Thus, appellant had entered into two supply contracts and a contract for services which included supply of material related to supply of services. Appellant discharged service tax on the services contract taking it as a works contract. Revenue was of the view that the Offshore and onshore agreements also need to be included in the value of services rendered and surplus tax should have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He draws the attention of the Bench to the amendment to the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007 which were amended on 07.07.2009 vide Notification No. 23/2009-ST,dated 07.07.2009. These changes were explained by CBEC in D.O.F. No. 334/13/2009-TRU, dated 06.07.2009, Para 5.1 of which reads as follows: "5. Amendments in Rules (pertaining to service taxpayers): 5.1 Changes in the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007: These rules provide a simplified procedure for working out the tax liability by the service providers providing works contract service. Instead of working out the service element from the value of works contract and paying service tax at full rate (i.e. 10%) the service provider is allowed to pay 4% on the 'gross amount charged' for the works contract. The reason for prescribing the lower rate under the scheme is that the service provider need not bifurcate the gross value of works contract. It was expected that the gross value should be shown to include the total value of materials as well as services used in providing the taxable services. However, it has been reported that in certain case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been received prior to 07.07.2009. He also relies on the case of Essar Projects (India) Limited [2014(33) S.T.R. 696 (Tri. Ahmd.)] on identical case (in which one of us Shri M.V. Ravindran was a Member). The relevant extracts of the order are as follows: 9.1 It is clear from the above Circular issued by C.B.E. & C. that where execution of works contract has commenced prior to 7-7-2009, in those cases gross amount, for the purpose of payment of Service Tax, will not include the free of cost supply by the service recipient. In this regard, appellant has argued that as per clause 15.4 of the Supply Contract, reproduced below, full rights/title/ownership in respect of each item of the Balance of Plant stand transferred to the owner on delivery by the supplier at the site :- "15.4 - The full right, title, ownership and interest and all risks (except for those specifically retained by the Supplier in accordance with the terms of this Contract) in each item of the Balance of Plant shall be transferred to the Owner upon Delivery by the Supplier of that item of the Balance of Plant at the Site and upon endorsement of the documents required under Article 15.1." 9.2 In view of the above c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payment of royalty to the collaborator induced any extra commercial obligation for the price of CKD packs, parts and components. Ordinarily the Court should proceed on the basis that the apparent tenor of the agreements reflect the real state of affairs. It is, no doubt, open to the revenue to allege and prove that the apparent is not the real and that the price for the sale of the CKD packs is not the true price, and the price was determined by reckoning or taking into consideration the lumpsum payment made under the collaboration agreement in the sum of 15 million French Francs. The short question is whether the revenue has succeeded in showing that the apparent is not the real and that the price shown in the invoices does not reflect the true sale price and so Section 14(1)(b) of the Act was properly invoked." 11. In view of the law laid down by the Hon'ble Supreme Court, a contract has to be interpreted in a manner from the apparent tenor of the agreement and apparently it has to be accepted as the real state of affairs. 6. Ld. DR reiterates the findings of the lower authorities and forcefully argues that the appeal needs to be rejected. 7. We have considered the argumen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant's case will not be covered under the Explanation added with effect from 7.7.2009 in Rule 3(1) of the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007. In view of the findings above and nature of EPC works contract service and the existence of only one contract No. for all the supply and the service contracts, the scope of supply/work being the same i.e. "basic and detailed design, engineering, procurement, manufacture, assembly, pre assembly, inspection, tests at contractors and/or his sub vendors' works, shock painting, packing, transportation to site, freight and insurance of balance of plant systems and equipment package for 2 x 800 W thermal power plant"; that the assessee is responsible for installation of the whole facility under the EPC contract by using the Off-shore supply and On-shore supply procured by the assessee themselves, and therefore, the contracts have to be considered as one. In this regard, it is observed that both, supply contract and service contract have no separate defects liability clauses and the total price of the Contract, price variation being for the total price of the contract, and the Liquidated Damages applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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