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TMI Blog2024 (6) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... a power plant, services for Civil Works and Structural and Architectural Works and related services for inland transportation (hereinafter referred to as the "Contract No. 2"). 2.1 In the said Contract No.1, the appellant was required to design manufacture and supply plant and equipments, as per details contained in the said Contract No.1, at a contract price specified in the said contract, which included all taxes and duties payable as per statutes. 2.2 The goods/equipments specified in Contract No.1 which are of specific nature, are manufactured in their respective manufacturing plants located in different States and despatched directly to WBPDCL after inspection and approval by them. The appellant paid Central Sales Tax on the said goods. The appellant also purchased goods/ equipments from the vendors outside the State and effected transfer of documents of title thereof in favour of WBPDCL. The appellant company also purchased goods/equipments from the vendors from the State of West Bengal. Such sales were disclosed in the returns as resale to WBPDCL and due tax under the West Bengal Value Added Tax Act was discharged. Supply of the goods/ equipments completed the obligation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be included in the taxable value of Contract No.(2) for payment of service tax under the composition scheme as held by this Tribunal in the case of TRF Limited Vs. Commissioner of Central Excise & Service Tax, Patna & Others reported in 2024 (3) TMI 231 -CESTAT, Kolkata. 4. On the other hand, the ld.A.R. for the Revenue, supported the impugned order. 5. Heard both the parties and considered the submissions. 6. The facts are not in dispute that the appellant entered into the agreement dated 20.05.2008, which is much prior to 07.07.2009 and the appellant has started execution of work prior to 07.07.2009. Therefore, the facts in this case are similar to the facts of the case of TRF Ltd., wherein this Tribunal has observed as under : "6. We find that the facts are not in dispute. The agreements were entered by the appellant and the service recipient prior to 07.07.2009 i.e. 19.02.2008 and 04.12.2008 and it is not in dispute that the appellant started execution of works prior to 07.07.2009 and raised invoices and also received payments thereof. In that circumstances, the CBEC Circular No.150/1/2012-ST dated 08.02.2012 is relevant to decide the present issue. For better apprec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... communicated to the field formations and service tax assessees through Trade Notice/Public Notice. Hindi version to follow." As per the said Circular, the explanation has been appended to Rule 3 (1) of the Composition Scheme, which clearly shows that the contract entered prior to 07.07.2009, the value of cost of free supply will not be includible to determine the gross amount for the purposes of payment of service tax. 7. The same view has been taken by this Tribunal in the case of Essar Projects (India) Limited (supra), wherein this Tribunal has observed as under : "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 sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove plea we have to bear in mind certain basic principles. The bargain between the respondents and the foreign collaborator is evidenced by written agreements, (dated 6-11-1979 & 6-3-1980). There is no material nor was it suggested that the dealings between the parties are not at arm's length. No evidence is available to show that 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07.2009. By inserting an explanation, it was also clarified by CBEC themselves that the inclusion of the values would not apply to such contracts where either the execution of works contract has already started or any payment (whether in part or in full) has been made on or before 07.07.2009. In this particular case, the payments in respect of all the three contracts were made prior to 07.07.2009. Needless to say that there is no separate payment under the umbrella contract because it was only a combination of the other three contracts. This issue was agitated by the appellant before the adjudicating authority who, however, did not agree with this contention on the following words: " 7.1. The issue required to be decided in these proceedings is whether the contracts dated 12.08.2009 with service recipients, commenced before and payments received before 7.7.2009 can be considered as separate contracts or as one contract. It has been argued by the appellant that both the contracts are independent and cannot be considered as one for the purpose of determining taxable value of the service provided. It was further argued that even if two contracts are treated as one, still appellant' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above, we find that the value of the material supplied under off-shore and on-shore contracts cannot be included in the value of the works contract service as the advance payment in respect of all the three contracts are received prior to 07.07.2009. 9. We also find that this case is identical to the case of ESSAR Projects (India) Limited (supra) in which a similar view has been taken. In view of the above, we find that the demand of service tax and interest and imposition of penalties in the impugned order are not sustainable and the impugned order is liable to be set aside and we do so. 10. The appeal is allowed and the impugned order is set aside." 9. As it is evident that all the contracts were entered by the appellants with the service recipient prior to 07.07.2009 and the invoice has been issued and the payment was also received. In that circumstances, in terms of CBEC Circular No.150/1/2012-ST dated 08.02.2012, the value of supply of goods contract, which were executed by the appellant and the same were given to the appellants for execution of Contract II, were the contract value, in that circumstances, the value of goods in Contract I cannot be included for dete ..... X X X X Extracts X X X X X X X X Extracts X X X X
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