TMI Blog2019 (11) TMI 675X X X X Extracts X X X X X X X X Extracts X X X X ..... section between the service component and the material component thereof - We, therefore, do not agree with Ld. DR that the contract can be vivisected, in this case and the demand has been raised on the entire value of the contract including the material part of it because the appellant failed to provide the break up. Had there been a break up of the material and the service components in the contract itself, the demand would have been raised on the service component ignoring the material. There is nothing on record which is placed before us which shows that there are two different contracts or a single contract with two separate distinct components for supply of material and rendition of services - In view of the above, it is found that the contract in question is a composite works contract. Composite works Contract involve both rendition of service and deemed sale/sale of the materials used in rendering such services. The Hon. ble Apex Court has observed in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT] that works contract is a separate specie of contract known to the trade and commerce dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dors towards freight. The vendors in turn had availed the services of GTAs and paid them. In other words the appellants claim that they have only reimbursed to their vendors for the goods transport agencies services which they had paid. The department s contention is that they have not produced any evidence to substantiate this fact - Having accepted the assessee s records that amounts have been paid towards goods transport, the department cannot reject the contention that a part of it was paid directly to their vendors and in the absence of any evidence to the contrary. In view of the above, the contention of the department is not sustainable and the demand on this ground must also fail. Demand of interest on the delayed payment of service tax - tax on mobilization advances - it is the case of the department that an amount has been paid as advance towards rendition of service and service tax should have been paid as soon as the amount has been received - HELD THAT:- It is the case of the appellant that it is not an advance for rendition of service but is in the nature of mobilization advance which is backed by bank guarantee and on such an advance they have paid interest to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice . (d) An amount of ₹ 5,94,425/- should not be demanded from them as Service Tax under Transport of Goods by Road service under Reverse Charge Mechanism. (e) An amount of ₹ 81,39,131/- of irregularly availed CENVAT Credit should not be recovered from them under Section 73 of Finance Act, 1994 read with Rule 14 of CCR 2014. (f) Interest as applicable on the above should not be demanded. (g) Why penalty should not be imposed on them under sections 77 78 of the Finance Act, 1994. 2. After following due process, the original authority has confirmed the following only: i) Service Tax of ₹ 1,07,12,000/- under the category of Erection, Commissioning and Installation Service . ii) An amount of ₹ 5,94,425/- under the category of Goods Transport Agency Service of which ₹ 3,34,653/- already paid by the appellant has been adjusted. iii) Interest under section 75 as above and also on delayed payment of service tax on advances received by them. iv) Imposed a penalty of ₹ 1,11,13,425/- under section 78 of the Finance Act, 1994. v) Imposed a penalty of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eading. Merely because the works contract service has been made a taxable category post 01.06.2007, it does not automatically mean that it can also be charged under any other head after this date. It is a well settled principle that if a service is taxable under one or more categories, the appropriate category as per law has to be selected. As far as the composite work service is concerned, there is only one category in the service tax provision under which it can be charged. For this reason alone, the demand of service tax on Erection, Commissioning or Installation service on this composite works contract does not sustain and needs to be set aside. Charging a works contract under Erection, Commissioning or Installation Service falls beyond the scope of the law. He relied on the following case laws: a. Mahakoshal Beverages Pvt. Ltd. [2014(33)S.T.R 616 (Kar.) b. R.K. Construction [2016(41)S.T.R.879 (Tri.-Mumbai). c. Sai Teja Constructions [2019(7)TMI 575 (CESTAT-Hyderabad). 6. He also argued that the floodlighting along the Indo-Bangladesh Border is essentially linked to transmission and distribution of electricity and hence is exempted vide notif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also charged by their customers and therefore this is nothing but a sort of loan given to them and not the payment made in advance for the services rendered. The amount was thereafter adjusted at the time of final settlement of bills and the service tax was duly paid. The case of the Revenue is that the appellant should have discharged the service tax as soon as they receive mobilization advances on the ground that it is an advance payment for the services. However, considering that they have given a bank guarantee and have also paid interest to their customers, the amounts received can only be considered as mobilization advances and there cannot be any service tax liability on such advances. He relies on the following case laws: i) GJF Construction Company Limited vs. CCE, Hyderabad [2018(8)TMI 323 CESTAT-Hyderabad]. ii) Thermax Instrumental Limited vs. CCE [2015(12)TMI 12222-CESTAT-Mumbai] 8. He also argued that there is no justification to invoke the extended period of limitation and they had no intention to evade payment of service tax as the entire contract which they have executed is towards an MHA project of floodlighting along the Indo Banglade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility on that date and therefore the interest on delay payment of service tax is correctly demanded. 12. On the question of limitation of time, he would assert that the appellant had not disclosed these details in their ST-3 returns and the matter came to light only when the department had conducted investigation. 13. We have considered the arguments on both sides to decide the issues. As far as the demand on the project for construction of floodlighting around Indo Bangladesh Border in the State of Tripura is concerned, it is evident from the records before us that the project was awarded by Ministry of Home Affairs to M/s Coastal Projects Private Limited, A Government of India Enterprise, who have further subcontracted the same to the appellant on back to back basis. The scope of work indicated in the contract is as follows: Annexure-1: Scope of work: 2. Flood-lighting along Indo-Bangladesh Border in the state of Tripura between B.P.No. 2254/eRI to 2265 3. Scope of work: M/s Coastal Projects Pvt. Ltd. Limited is responsible for the following works: Section:A Section:B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tc. to be completed immediately after their arrival at site. 12. In case if there is any delay in route approvals of lines, erection of poles and stringing of lines shall be immediately brought to the notice of the headquarters of M/s Coastal Projects Pvt. Ltd., Hyderabad in writing, so that we take appropriate action to complete it. (13) If there is no work at site for a week time, M/s Vishwanath Projects, Hyderabad is authorized to take appropriate action which it deems fit. (14) Prices: Prices mentioned in the schedule of price (Annexure-II) are FIRM through the contract. (15) Any extra or additional items as required by NPCC have to be executed by M/s Vishwanath Projects Limited as per the agreement conditions. (16) Payment terms: All the payments will be made against the Bills raised/submitted to NPCC after deduction of all applicable taxes. M/s Vishwanath Projects Limited are eligible to get 96.65% of the cheque amount received from NPCC. DEDUCTIONS: 17. Applicable taxes will be deducted at source from the running account bills. Variations in statutory levies by the Government on the day of paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ATED COST OF ALL ABOVE ITEMS 10,61,22,441.10 OFFER OF THE AGENCY (In words Percentage) ABOVE/BELOW/AT PAR THE ESTIMATED COST OF ALL ABOVE ITEMS TOTAL OFFER AMOUNT IN FIGURE 10,61,22,441.00 15. A plain reading of the above shows that the contract involved both supply of material and installation and commissioning of the equipment with no clear demarcation/vivisection between the service component and the material component thereof. We, therefore, do not agree with Ld. DR that the contract can be vivisected, in this case and the demand has been raised on the entire value of the contract including the material part of it because the appellant failed to provide the break up. Had there been a break up of the material and the service components in the contract itself, the demand would have been raised on the service compone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , running the air conditioners, providing lighting or fans all of which are essential for rendition of services. Merely because they are connected to a grid, the service does not become transmission and distribution of electricity. 17. The appellant also argued against invocation of the extended period of limitation but we do not find it necessary to go into the question of limitation since it is found that the demand is not sustainable on merit itself being in the nature of Works Contract Service and being charged under Erection, Commissioning and Installation Service, 18. As far as the service tax on Goods Transport Agency Service is concerned, the demand has been computed on the freight expenses incurred by the appellant during various years as seen from their books of accounts, as follows: PERIOD Freight Expenses 25% taxable Value ST payable ST paid Service Tax short Paid 2007-08 224029 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the department is not sustainable and the demand on this ground must also fail. 21. Regarding the third issue of demand of interest on the delayed payment of service tax on the amounts received as mobilization advances, it is the case of the department that an amount has been paid as advance towards rendition of service and service tax should have been paid as soon as the amount has been received. It is the case of the appellant that it is not an advance for rendition of service but is in the nature of mobilization advance which is backed by bank guarantee and on such an advance they have paid interest to their customers. Therefore, it is nothing but a secured loan which has no nexus to the service provider. The amount so received is a mobilization advance which has been adjusted against total bill, on which they have discharged full amount of service tax. We find that the question of taxability on mobilization advances has been well settled and this Bench in the case of GJF Construction Company Limited vs. CCE, Hyderabad (supra) and CESTAT Mumbai in the case of Thermax Instrumental Limited vs. CCE (supra) held that mobilization advance received by the assessee is not c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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