At, Customs Excise Service Tax Appellate Tribunal South Zonal Bench At Chennai
By, THE HONORABLE JUSTICE: SULEKHA BEEVI C.S.
By, MEMBER AND THE HONORABLE JUSTICE: B. RAVICHANDRAN
For Petitioner: K. Veerabhadra Reddy, JC (AR) And For Respondents: S. Venkatachalam, Advocate
1. Revenue is aggrieved by the order dated 18.3.2009 of Commissioner of Central Excise (Appeals), Chennai. The respondents are engaged in various erection commissioning work for oil companies. They are engaged in the manufacture of certain items used in the said erection commissioning. When they manufactured the item, they paid excise duty. In pursuance of a composite contract
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work, when they supplied their own items manufactured and cleared, certain items procured from outside along with supply of labour, completed the erection commissioning work for the client. Revenue entertained a view that erection commissioning of work undertaken by the respondent is liable to be taxed as a service contract and accordingly proceedings were initiated against the respondents. The original authority confirmed the service tax demand of Rs. 38,42,613/-. On appeal, by the impugned order, Commissioner (Appeals) dropped the demand holding that the respondents are executing composite works contract which is not liable to be taxed prior to 1.6.2007.
2. The Ld. AR reiterating the grounds of appeal submitted that the respondents raised clearly identifiable invoices for provision of service. Though the contract may be involving design, supply, erection and testing. What is stated to be taxed in the present proceedings is the service portion of the contract which is identified and recognized through the invoices raised by the appellant. As such, he submitted that the impugned order fell in error in not recognizing clearly identifiable services rendered by the respondent.
3. The Ld. counsel for the respondent contested the appeal by the Revenue and produced sample copies of contracts. He submitted that the method of invoice which is in pursuance of a composite work contract, to realize money on a progressing work cannot determine the tax liability of the respondent. He relied on the judgment of the Hon'ble Supreme Court in the case of Commissioner Vs. Larsen & Toubro Ltd.: 2015 (39) STR 913 (SC).
4. Heard both sides and we have perused the appeal records.
5. We have also perused the sample contract dated 19.3.2004 executed by the respondent for Indian Oil Corporation, Mumbai. The contracts are admittedly for design, supply, erection, testing, commissioning and maintenance of LPG dispensation station and similar such work. Admittedly, the contract involves supply of respondents own manufactured goods, certain procured goods and provision of labour and technical input for the completion of the work. We note that this is a typical works contract service liable to be taxed only with effect from 1.6.2007 in view of the Hon'ble Supreme Courts decision in Larsen & Toubro Ltd. cited supra. The claim of the Revenue that certain commercial invoices were specifically for service and the contract can be clearly segregated for service portion is not sustainable. The rate schedule mentioned in the contract by itself does not say the nature of contract. Any contract executed over a period of time, the respondent shall be issuing periodical invoices to realize the money. The invoices may be for supply of goods or for labour or for both, the nature of such invoices does not decide the contract liability. What is important is to see whether the respondent is acting in the ambit of overall composite works contract. In the present case, we are in agreement with the findings of the impugned order that these are composite works contract and cannot be taxed as simple service contracts under a particular heading like erection commissioning service.
6. In view of above discussion, we find no merit in the appeal filed by Revenue and the same is dismissed. The cross-objection filed by the respondent is disposed of accordingly.
(Dictated and pronounced in open court