Custom, Excise & Service Tax Tribunal
Excel Insulation Inc vs Vadodara-I on 14 February, 2019
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
West Zonal Bench, Ahmedabad
Appeal No. ST/640/2010-DB
(Arising out of OIO No. COMMR-A-/197/VDR-I/2010 dated 30/08/2010 passed by
Commissioner of Central Excise, Customs and Service Tax-VADODARA-I)
Excel Insulation Inc . - Appellant
Vs.
C.C.E. & S.T., Vadodara-i - Respondent
Represented by:
For the appellant : Shri Dhawal Shah, Advocate
For the respondent : Shri S.N. Gohil, Supdt. (AR)
CORAM:
Hon'ble Mr. Ramesh Nair, Member (Judicial)
Hon'ble Mr. Raju, Member (Technical)
Date of Hearing: 09.01.2019
Date of Decision: 14.02.2019
ORDER NO. A/10268 / 2019
Per: Raju
This appeal has been filed by M/s Excel Insulation Inc against confirmation of demand of Service Tax, interest and imposition of penalty under section 76 and 78 of the Finance Act, 1994. The appellants are engaged in the business of providing service of erection, commissioning and installation. However, the appellants have not acquired any Service Tax registration. Consequently, an offence case was booked and a notice demanding Service Tax for the period 16/06/2005 to 30/09/2006 was issued to the appellant.
2. Ld. Counsel for the appellant pointed out that they were engaged in provision of Thermal Insulation, Sound Insulation, Water Proofing, by using their labour and materials. He argued that since they were consuming material while provision of the service that amounted to works contract and the activity of works contract was not taxable during the period 16/06/2005 2 ST/640/2010-DB to 31/12/2006 has held by Hon'ble Apex Court in the case of Larsen & Toubro 2015 (39) STR (913). It was argued that the appellant had an understanding that since they were involved in Works Contract using their labor along with material, which stands sold to the customer and accordingly, the contract was Works Contract. He argued that since the period is involved is prior to the introduction of Service Tax on Works Contract with effect from 01/06/2007, no tax can be levied on this activity. 2.1 As an alternate submission, Ld. Counsel asserted that in terms of Serial No. 5 of the table to the notification no. 01/06-ST dated 01/03/2006 an abatement of 67% from the gross amount of Service charge is admissible to erection, commissioning and installation agencies, if the gross amount of service charge includes the value of plant, machinery, equipment, structures etc.
3. Ld. AR relied on the impugned order.
4. We have gone through rival submissions. We find that the primary argument of the appellant is contract undertaken by them is a Works Contract and consequently, no tax can be levied for the period prior to 01/06/2007 as held by Hon'ble Apex Court in the case L&T Ltd. (supra). The appellant had raised this issue regarding the contract being works contract before Addl.Commr. As it is apparent from record of personal hearing it is seen that the Order in Original does deal with this claim of the appellant.
4.2 The Commissioner (A) held that the claim of the appellant that the contract is a works contract cannot be examined as no evidence has been produced either before the Original Adjudicating Authority or before the Commr. (A) to prove that there was transfer of property which was leviable 3 ST/640/2010-DB to tax as sale of goods as envisaged in the definition of Works Contract. In this regard Ld. Counsel has contended that since the contract itself was produced which showed that the value for the service are included the value of the material consumed. It automatically meant that the contract were in the nature of Works Contract.
4.2 In this regard, it is pertinent to note that not all contracts which involve any transfer of property become Works Contract. In this regard, the observation of Hon'ble Apex Court in Para 42 & 43 of the decision in the case of Bharat Sanchar Nigam Ltd. vs. Union Of India 2006 (3) TMI (1) SC are relevant. Para 42 & 43 reads as follows:
"42. Of all the different kinds of composite transactions the drafters of the 46th Amendment chose three specific situations, a works contract, a hire purchase contract and a catering contract to bring within the fiction of a deemed sale. Of these three, the first and third involve a kind of service and sale at the same time. Apart from these two cases where splitting of the service and supply has been Constitutionally permitted in clauses (b) and (g) of Clause 29A of Art. 366, there is no other service which has been permitted to be so split. For example the clauses of Art. 366 (29A) do not cover hospital services. Therefore, if during the treatment of a patient in a hospital, he or she is given a pill, can the sales tax authorities tax the transaction as a sale? Doctors, lawyers and other professions render service in the course of which can it be said that there is sale of goods when a doctor writes out and hands over a prescription or a lawyer drafts a document and delivers it to his/her client? Strictly speaking with the payment of fees, consideration does not pass from the patient or client to the doctor or lawyer for the documents in both cases.
43. The reason why these services do not involve a sale for the purposes of Entry 54 of List II is, as we see it, for reasons ultimately attributable to the principles enunciated in Gannon Dunkerley's case, namely, if there is an instrument of contract which may be composite in form in any case other than the exceptions in Article 366 (29-A), unless the transaction in truth represents two distinct and separate contracts and is discernible as such, then the State would not have the power to separate the agreement to sell from the agreement to render service, and impose tax on the sale. The test therefore for composite contracts other than those mentioned in Article 366 (29A) continues to be-did the parties have in mind or intend separate rights arising out of the sale of goods. If there was no such intention there is no sale even if the contract could be disintegrated. The test for deciding whether a contract falls into one category or the other is to as what is the substance of the contract. We will for the want of a better phrase, call this the dominant nature test.
4 ST/640/2010-DB It is apparent that just because goods are consumed in provision of Service, a contract does not become a Works Contract. There has to be a clear intention of sale which needs to be established before a contract can be terms as works contract. It is seen that the lower authorities have not examined the contract which has been included by the appellant in this appeal memorandum. The said contract needs to be tested against the claim of the appellant that the said contracts are in the nature of works contract in the light of decision of Hon'ble Apex Court cited above. Thus, since the matter has not been examined by both the authorities in the proper perspective, the impugned order is set aside. The matter is remanded to the Original Adjudicating Authority for fresh decision in the light of above discussion.
(Pronounced in the open Court on 14.02.2019)
(Raju) (Ramesh Nair)
Member (Technical) Member (Judicial)
DS