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TMI Blog2024 (5) TMI 463X X X X Extracts X X X X X X X X Extracts X X X X ..... vices with respect to those goods, which also included transfer of property in certain other goods used by the appellant while rendering services under Contract II qualifying this contract as a "works contract". 2.2 As per the terms of agreement, the appellant was required to execute two separate contracts, i.e. Contract I & Contract II. 2.3 The execution of two separate Contracts for sale of goods and provisions of services along with supply of goods, was the condition put forth by the service recipient APCPL and DVC as mentioned in the Instruction to bidders and in General Conditions in the Contract and not the choice exercised by the appellant. 2.4 Since the Contract II involved provisions of services along with supply of goods, the appellant considered this contract as works contract and opted to pay the service tax on Contract II under Rule 3 of Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007 as "Composition Scheme". Accordingly, the appellant paid the service tax on the gross value of the consideration under Contract II at the time of composition rate of tax prescribed under the Composition Scheme. 2.5 Against these two Contracts, various show c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Scheme for Payment of Service Tax) Rules, 2007, as it stood prior to 7th day of July 2009 - Regarding. Reference has been received from a field formation seeking clarification as to whether 'gross amount', for the purpose of payment of service tax under the Works Contract Composition Scheme, included the value of free of cost supplies, for the period prior to 7-7-2009. 2. The issue has been examined. The meaning of the expression 'gross amount' appearing in Rule 3(1) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, is qualified by the Explanation inserted in the said Rule with effect from 7-7-2009. Since the Explanation inserted in Rule 3(1) with effect from 7-7-2009 is clarificatory and prospective in nature, inclusion of value of free-of-cost supplies of goods and services in or in relation to the execution of Works Contract [mentioned in the Explanation to Rule 3(1)(a)(i) and (ii)] in the 'gross amount' for the purpose of payment of service tax on works contract under the composition scheme, is a legal requirement, only with effect from 7-7-2009 when the Explanation became a part of Rule 3(1). 3. The explanation appended to Rule 3( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of completion of work, is not correct. In the case of imported equipments as well as the Balance of Plant equipment, the ownership/title lies with the service recipient when the same are received at site. Accordingly, it has to be held that after receipt of balance equipment, the title/ownership of the same is transferred to the service recipient. Accordingly, adjudicating authority cannot go beyond the C.B.E. & C. Circular No. 150/1/2012-S.T., dated 8-2-2012 wherein it has been clarified that for the works contract executed before 7-7-2009, free of cost supplies are not required to be added to the gross amount, for the purpose of payment of Service Tax. There is no evidence on record to convey that both, the supply contract and the construction contract were artificially bifurcated after introduction of explanation to Rule 3(1) of Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. 10. The Hon'ble Supreme Court in the case of UOI v. Mahindra and Mahindra Limited [1995 (76) E.L.T. 481 (S.C.)] in Para 5 has held as follows :- "5. The main thrust of the arguments of the learned Solicitor General before us was that the price for the sale of CKD packs by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Service Tax) Rules, 2007, constitute an altogether a different area of operation. Based on the above observations, it is concluded that both the contracts dated 24-8-2007 for Supply of equipments and Construction of works has to be treated as distinct and separate contracts and value of supply contract cannot be added to the value of the construction contract for the purpose of Service Tax liability. 13. In view of the above, appeal filed by the appellant is allowed and cross-objection filed by the Revenue is rejected." 8. Further, in the case of Tata Projects Limited (supra), this Tribunal has again examined this issue and observed as under : "7. We have considered the arguments on both sides and perused the records. There is no dispute on the facts of the case that the appellant had entered into three agreements with M/s APPDCL as per the LOI issued by them, of which two are supply contracts and one is a contract for services which also included supply of some material. He also had an umbrella agreement combining these three agreements. It is not also in dispute that in addition to the supply, the appellant had discharged VAT/CST as the case may be in respect of the supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Onshore 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 applicable for the entire and complete Design, Engineering, Procurement, manufacture supply, erection, testing, commissioning, initial operation, reliability operation and performance guarantee tests on EPC basis for Balance of Plant (BOP) systems and equipment for 2 x 800 MW supercritical coal fired Thermal Power Plant, the contracts have to be considered as one." 8. In other words, the adjudicating authority held that the three contracts in question are essentially part of the same contract and they we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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