TMI Blog2024 (4) TMI 433X X X X Extracts X X X X X X X X Extracts X X X X ..... rightly excluded the same from the total value of construction of weigh bridges in claiming the abatement under the respective notifications. Undisputedly the appellant entered into a sub-contract with M/s Subhash Infra Engineers Pvt. Ltd. for this item of the work. They have produced the invoices raised by the sub contractor upon them for the work sub contracted. The fact about allocation of this work to sub contractor by the appellant is not disputed by the revenue in the present case. That being so, the finding recorded by the authorities below that the contract was composite contract for entire project could not be upheld. Further from the fact that value of contract between the appellant and their service recipient is required to be determined in two manners as per the clause 5.1, and the lower of two values has to be adopted, clearly show that the both the parties to contract, i.e. appellant and Lalitpur Power Generation Company Ltd. viewed that contract could be vivisected into sub contracts, to be executed by the sub contractors. It is settled position in law that the contract should be viewed in the context they are entered and as per the understanding of the parties to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the Audit Report that the construction of road was not recognized as a separate activity and therefore service tax was leviable on the gross amount charged by the Appellant for construction work including construction / strengthening of road from Lalitpur NH to the project site. The Audit relied upon para 14.5 of the Board s Circular No.B-1/6/2005-TRU dated 27.07.2005 issued to clarify changes on service tax side in the Union Budget 2005-06; iv. The construction of road was undertaken for facilitating transportation of heavy load material and machinery relating to the power project and not for public at large and hence the road so constructed / strengthened was not for use of the general public but for the project work. Hence the activity undertaken by the Appellant for construction of road could not be considered as an activity exempted from service tax. That on being pointed out by the Audit, the Appellant paid the entire service tax demand of Rs.91,38,691/- vide debit entry No.107 dated 05.03.2013 in the Cenvat Credit Account under protest. In addition, the Appellant also deposited interest of Rs.30,50,079/- vide challan No.50092 dated 19.03.2013 with Punjab National Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so constructed was a part and parcel of composite contract and no separate price bifurcation was available on record and hence the Appellant was not entitled for availing benefit of road construction under works contract service. Being aggrieved with the Appellate order, the Appellant has filed this appeal before the Tribunal. 2. Learned Advocate appearing on behalf of the Appellant submits that the scope of work to be executed by the Appellant is given in para 3.1 of the contract which includes Site Development Work including area grading, excavation and leveling of land, construction of internal roads and pathways, boundary walls, drainage, diversion and reconstruction of public pathways passing through the site, construction of water supply system, structures and buildings etc. The scope of work specifically include improvement and strengthening of road from Lalitpur Highway to the project site of power plant of M/s LPGCL to facilitate transportation. That as per clause 5.1 of the contract, it was agreed that the contract price for the complete work to be executed by the Appellant was lower of the following:- Value of the work order placed by the Appellant to the sub-contractor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant. That the Appellate Authority failed to notice that in clause 3.1 of the contract, the scope of work has been divided into major segments. Improvement and strengthening of road from Lalitpur National Highway to the project site has been separately described as one of the segments / packages. In view of this clause, it cannot be said that the construction of road in question was not recognized as a separate activity under the contract. The Appellant is not required to enter into a separate contract for construction of road. It is submitted that even if the Appellant entered into a single contract with M/s LPGCL for performing miscellaneous works of procurement, supply and construction relating to the thermal power project, the construction of road in question is enumerated as a separate work. Even the value of the work for road construction is separately defined in clause 5.1 of the Agreement as sum total of payment made to the subcontractor + 7.5% thereof as service charges to the contractor/ Appellant. Therefore, the clarification issued by the Board in para 14.5 favouring levy of service tax on the gross amount charged for construction including value of road, is not ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Construction Service expanded/ renamed vide Union Budget 2005-06. The expression Commercial or Industrial Construction (in short, CIC service) is defined in Section 65(25b) as under:- Commercial or Industrial Construction means- (a) construction of a new building or civil structure or a part thereof, or (b) construction of pipeline or conduit; or (c) completion and finishing services such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services, in relation to building or civil structure; or (d) repair, alteration, renovation or restoration of, or similar services in relation to, building or civil structure, pipeline or conduit, which is (i) used, or to be used, primarily for, or (ii) occupied, or to be occupied, primarily with, or (iii) engaged, or to be engaged, primarily in, commerce or industry, or work intended for commerce or industry, but does not include such services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams; That in the context of Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Lalitpur NH to the project site to facilitate transportation of heavy machinery is specifically identified in the contract as one of the works to be executed by the Appellant. Since the Appellant has outsourced the construction of road work to sub-contractor (M/s Subhash Infraengineers Pvt. Ltd.,), the value of the bills raised by the sub-contractor + 7.5% markup represents the aggregate value of the service provided by the Appellant to M/s LPGCL for construction of road which stands excluded from the ambit of both CIC service and works contract service. 9. Further Appellant submitted that the taxable service provided by them were taxable as Works Contract Services and the Appellant was paying service tax @4.12% under Composite Scheme under Works Contract Service. The works contract category came into operation from 01.06.2007 and it was defined in sub-clause (zzzza) of Section 65(105) as under:- service provided or to be provided 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. 10. In view of the above clause (zzzza), it is clear t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice of works contract activity. 12. We find that in the initial stage, the Adjudicating Authority in para 6.10 observed that the road constructed by the Appellant was not for general public but for specific purpose of facilitating the movement of heavy material and machinery pertaining to M/s LPGCL and therefore the exclusion of road so constructed / strengthened by the Appellant from the works contract service category was unwarranted. The Appellant submitted the following documents to the Appellate Authority to rebut the findings of the Adjudicating Authority and plead that the road of about 30 Km length from Lalitpur NH to the power plant of M/s LPGCL was meant for public use as well as for transportation of heavy material and machinery in the initial stages when the plant was under construction:- (a) Certificate obtained from Executive Engineer, Regional Division, Public Works Department (PWD), Lalitpur to the effect that the ownership of the roads from the National Highway to Banpur via Lalitpur power plant belongs to PWD. Thus, right to use passage belongs to PWD Department of UP State Government and merely the fact that the Appellant constructed/ strengthened the road unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontract in which Improvement strengthening of road from Lalitpur to Site including to facilitate transportation is one of the work of that composite contract. The records also show that the work of construction of road was undertaken with the objective of facilitating movement of the heavy machinery relating to power project of M / s Lalitpur Power Generation Company Limited. Being a part of single composite contract the consideration received for construction of road shall also be a part of gross taxable value for the purpose of service tax. 15. Adjudicating Authority has observed as follows:- 6.10 In the light of the above discussion, I have observed that in the present case, work of construction of roads was entrusted by M/s Lalitpur Power Generation Company Limited to the party and it was a part of the comprehensive miscellaneous works contract for power project under a composite work contract signed between the Party and M/s Lalitpur Power Generation Company Ltd. on 20.01.2011. The records also show that the work of construction of road was included in the composite contract. I find that in the present case the construction of road was undertaken with the objective of facilita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmercial complex is a single contract where the construction of road is not recognized as a separate activity as per the Contract, then the service tax would be leviable on the gross amount charged for construction including the value of construction of roads. It is also noticed that in para 12.1 where general conditions of the contract are mentioned it is clearly denoted that .... for the entire works are annexed as Annexure 1A .... I have also observed that there is no bifurcation of value of work as claimed by the party. Therefore, the party's plea are not tenable and therefore being a party of the single composite contract to perform the consideration on which the demand is raised in respect of road construction is also taxable value for the purpose of service tax. 16. The issue in the present case for consideration is not whether the road is a public road or a private road. Though appellant has produced certificate from the PWD to effect that the road which was strengthened by the appellant for the purpose of movement of heavy vehicles for the power project was a public road, the same is not relevant for deciding the issue in hand. The only issue for consideration is wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r upon them for the work sub contracted. The fact about allocation of this work to sub contractor by the appellant is not disputed by the revenue in the present case. That being so in our view the finding recorded by the authorities below that the contract was composite contract for entire project could not be upheld. Further from the fact that value of contract between the appellant and their service recipient is required to be determined in two manners as per the clause 5.1, and the lower of two values has to be adopted, clearly show that the both the parties to contract, i.e. appellant and Lalitpur Power Generation Company Ltd. viewed that contract could be vivisected into sub contracts, to be executed by the sub contractors. It is settled position in law that the contract should be viewed in the context they are entered and as per the understanding of the parties to the contract. Hon ble Supreme Court has in the case of Food Corporation of India Ors Vs Abhijit Paul [2022 SCC Online SC 1605] observed as follows: 18. There are certain basic principles evolved by courts of law for deciphering the true and correct meaning of expressions in a contract. In Bihar State Electricity Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Biswanath Banerjee and Anr.[1989 Supp (1) SCC 487.], noting that the intention of the parties must be discerned from the context of the contract, this Court observed: 10. Ex praecedentibus et consequentibus optima fit interpretatio. The best interpretation is made from the context. Every contract is to be construed with reference to its object and the whole of its terms. The whole context must be considered to ascertain the intention of the parties. It is an accepted principle of construction that the sense and meaning of the parties in any particular part of instrument may be collected ex antecedentibus et consequentibus; every part of it may be brought into action in order to collect from the whole one uniform and consistent sense, if that is possible. ... In construing a contract the court must look at the words used in the contract unless they are such that one may suspect that they do not convey the intention correctly. If the words are clear, there is very little the court can do about it. In the construction of a written instrument it is legitimate in order to ascertain the true meaning of the words used and if that be doubtful it is legitimate to have regard to the circ ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
