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TMI Blog2025 (5) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... g for repair and maintenance of a vehicle, which appears to be a contract of repair of Motor Vehicle. 2. Department also observed that the appellant in some of the cases, the appellant issued single invoice for all the works i.e. (i) charges of parts, and paid VAT on such charges; (ii) labour charges and paid service tax on full value of labour charges; and (iii) charges for painting work and paid service tax on 70% value of such painting work and opted for valuation under Rule 2A(ii)B of Service Tax (Determination of Value) Rules, 2006. In other case of labour charges for repair and maintenance, the appellant paid service tax on full value of labour charges thereby they opt for valuation of such work contract under Rule 2A(i) of Service Tax (Determination of Value) Rules, 2006. 3. Department formed the opinion that they are not supposed to opt/follow both the procedures of valuation, as stipulated under Rule 2A(i) ibid and under Rule 2A(ii) ibid for one single contract/invoice. Since the appellant has not included value of parts of motor vehicle, in the value for charging service tax by opting Rule 2A(i) ibid and paid service tax on full value of labour charges, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been providing the maintenance and repair services of various kind. The service tax liability has been discharged in two separate ways: (i) Where the value in property of goods transferred while rendering the services was determinable, the liability has been calculated in terms of Rule 2A(i) of Service Tax (Determination of Value) Rules, 2006[hereinafter referred to as Valuation Rules]. (ii) With respect to paint job executed by the appellant it discharged the service tax in relation to the service portion involved in execution of the work contract in terms of Rule 2A(ii) of the Valuation Rules purely for the reason that the value of paints consumed in the execution of works contract was not available. The former mode of payment has not been disputed by the department. However, the tax calculated as per Rule 2A(ii) of Valuation Rules has been objected alleging the short payment of service tax by the appellant. 8. Learned counsel submitted that though Commissioner (Appeals) has also upheld the order in original confirming the alleged short payment, but he has arrived at an independent finding that since paint was used as consumable in providing the output service, the paint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation.- For the purposes of this clause,- (a) gross amount charged for the works contract shall not include value added tax or sales tax, as the case may be, paid or payable, if any, on transfer of property in goods involved in the execution of the said works contract; (b) value of works contract service shall include, - (i) labour charges for execution of the works; (ii) amount paid to a sub-contractor for labour and services; (iii) charges for planning, designing and architect's fees; (iv) charges for obtaining on hire or otherwise, machinery and tools used for the execution of the works contract; (v) cost of consumables such as water, electricity, fuel used in the execution of the works contract; (vi) cost of establishment of the contractor relatable to supply of labour and services; (vii) other similar expenses relatable to supply of labour and services; and (viii) profit earned by the service provider relatable to supply of labour and services; (c) Where value added tax or sales tax has been paid or payable on the actual value of property in goods involved in the execution of the works contract, then, such value adopted for the purposes of paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to such property." 11. From the said definition of works contract there appears two basic ingredients: (i) The contract shall involve transfer of property in goods in executing such contract which should be eligible to tax as sale of goods; (ii) The contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out improvement, repair, renovation, alteration of any movable or immovable property. If the service provider uses the goods in execution of work contract, the property of which is transferred, it qualifies as work of contract. However if the service provider only provides the specific services without transferring any goods, the services will not be considered as works contract. When this observation about the works contract is read in light of Rule 2A above it becomes clear that Rule 2A(i) has to be invoked where value of goods transferred while rendering the service is determinable/quantified/separately demanded for rendering Works Contract Service. Whereas Rule 2A(ii) has to be invoked when while rendering the service the value of consumable cannot be vivisected and it cannot be determined separately. 12. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From the invoices in question, it is apparent that the value of goods/spare parts while rendering the services of the motor vehicles by the appellant has been separately earmarked hence has been bifurcated from the value of the charges of labour incurred for rendering the services. However, vis-à-vis the service of painting there is no bifurcation of amount of paint consumed and the labour charges. The painting job becomes nothing but works contract where the value of goods is not determinable. Hence, we do not find any error committed by the appellant while calculating the tax liability vis-à-vis painting charges in terms of Rule 2(A)(ii). The Hon'ble High Court of Madhya Pradesh in the case of Agarwal Colour Advance Photo System Vs. Commissioner of Central Excise- 2020 (38) GSTL 298 (MP) has held that it is permissible to bifurcate the contract and levy sales tax of the value of the material involved in execution of the works contract. It was recorded as follows: "70. The forty-sixth Amendment leaves no manner of doubt that the States have power to bifurcate the contract and levy sales tax on the value of the material involved in the execution of the wo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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