TMI Blog2019 (6) TMI 840X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the Supreme Court in Larsen Toubro that a Composite Works Contract has to be taxed under WC service and cannot be taxed under ECI service under Section 65(105)(zzd). The position, therefore, that comes out is that the nature of services rendered by the Appellant was WC service and not ECI service. The show cause notice alleged that the Appellant was providing ECI service and MMR service. The demand was confirmed by the Adjudicating Authority under ECI service and MMR service, but the Commissioner (Appeals) has confirmed the demand only under ECI service. The impugned order, therefore, deserves to be set aside for this reason alone since the demand made under a particular category of service found to be incorrect in a subsequent proceeding, cannot be sustained - Appeal allowed - decided in favor of appellant. - SERVICE TAX APPEAL NO. 50433 OF 2016 - FINAL ORDER NO. 50770/2019 - Dated:- 24-5-2019 - MR. DILIP GUPTA, PRESIDENT AND MR. C.L. MAHAR, MEMBER (TECHNICAL) APPEARANCE: Shri A.K. Batra, Chartered Accountant for the Appellant Shri Vivek Pandey, Authorised Representative of the Respondent JUSTICE DIL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice 03 May, 2012 was issued to the Appellant. Paragraph 9 of the show cause notice is reproduced below : 9. During scrutiny of the documents submitted by the assessee it was noticed that all the agreements/contracts are for providing and fixing of 500 KVA silent type DG sets, acoustic enclose for 500 KVA DG set, S/I/T/C of 2*500 KVA (at site) Diesel Engine alternator set along with sound proof enclosure and AMF panel for NIB HF/VF, supplying, installing, testing and commissioning of 250 KVA silent type DG set, S/I/T/C of 250 KVA DG set with AMF panel, provisioning and installation of one No. 500 KVA DG set and acoustic enclosure, providing and fixing of Exhaust Chimney support for 625 KVA DG Set, RMO electrical services and sewage pump sets, RMO water supply pump, tubewell, booster pump and sewage plan, running, operation and routine maintenance of various pumpset which are appear to be well covered under Erection, Commissioning Installation services and maintenance or repair services. Whereas the assessee are paying Service Tax under Work Contract service. The assessee has failed to substantiate the fact that the contracts mentioned above are Works Contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inclusive of the value of the goods used for providing the taxable services in question. Therefore, I have no option but to resort to the provisions as envisaged in Notification No. 1/2006-ST dated 01.03.2006 to resolve the issue in hand. I find that vide the given notification only 33% of the Gross Turnover constitutes the service portion and a plain reading of Notification No. 1/2006-ST dated 01.03.2006 in the table at Sr. No. 5 for sub clause (zzd) of Sec. 65(105) no specific condition except the conditions of non-availment of cenvat credit and non-availment of Notification No. 12/2003-ST are envisaged and because the appellants have neither availed the cenvat credit benefit nor have been granted the benefit of Notification No. 12/2003-ST, as such the benefit of abatement is available towards the task undertaken by the appellants under the provisions of Notification No. 1/2006-ST dated 01.03.2006 and they are eligible for the abatement of 67% from gross value. Accordingly, the demand of Service Tax requires to be re-quantified on the abated value. To that extent only, the demand of Service Tax along with interest is sustained. 7. Shri A.K. Batra, learned Chartered Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Finance Act defines Erection, Commissioning or Installation to mean : 65(39a) - Erection, Commissioning or Installation means any service provided by a commissioning and installation agency in relation to erection, commissioning or installation of plant, machinery or equipment; 13. Section 65(105) deals with Taxable Service and in relation to ECI service, Section 65(105)(zzd) is reproduced below: 65(105)(zzd) - to any person, by a erection, commissioning and installation agency in relation to commissioning and installation; 14. It is w.e.f. 01 June, 2007 that sub-section (zzzza) was inserted in Section 65(105) of the Act in relation to execution of Works Contract . Taxable Service under Section 65(105)(zzzza) is defined as : 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, transport terminals, bridges, tunnels and dams. Explanation -For the purposes of this sub-clause, works contract means a contract wherein,- (i) transfer of property in goods involved in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 15. A reading of this judgment, on which counsel for the assessees heavily relied, would go to show that the separation of the value of goods contained in the execution of a works contract will have to be determined by working from the value of the entire works contract and deducting therefrom charges towards labour and services. Such deductions are stated by the Constitution Bench to be eight in number. What is important in particular is the deductions which are to be made under sub-paras (f), (g) and (h). Under each of these paras, a bifurcation has to be made by the charging Section itself so that the cost of establishment of the contractor is bifurcated into what is relatable to supply of labour and services. Similarly, all other expenses have also to be bifurcated insofar as they are relatable to supply of labour and services, and the same goes for the profit that is earned by the contractor. These deductions are ordinarily to be made from the contractor s accounts. However, if it is found that contractors have not maintained proper accounts, or their accounts are found to be not worthy of credence, it is left to the legislature to prescribe a formula on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are contained on the facts of the present cases. It will also be noticed that no attempt to remove the non-service elements from the composite works contracts has been made by any of the aforesaid Sections by deducting from the gross value of the works contract the value of property in goods transferred in the execution of a works contract. 17. It is, therefore, clear from the aforesaid judgment of the Supreme Court in Larsen Toubro that a Composite Works Contract has to be taxed under WC service and cannot be taxed under ECI service under Section 65(105)(zzd). 18. The position, therefore, that comes out is that the nature of services rendered by the Appellant was WC service and not ECI service. The show cause notice alleged that the Appellant was providing ECI service and MMR service. The demand was confirmed by the Adjudicating Authority under ECI service and MMR service, but the Commissioner (Appeals) has confirmed the demand only under ECI service. 19. The impugned order, therefore, deserves to be set aside for this reason alone since the demand made under a particular category of service found to be incorrect in a subsequent pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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