Custom, Excise & Service Tax Tribunal
Mr. P.P Gupta vs Kolkata North Commissionerate on 28 October, 2025
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH: KOLKATA
REGIONAL BENCH - COURT NO. 2
Service Tax Appeal No. 75328 of 2025
(Arising out of Order-in-Original No. 46-47/COMMR/CGST & CX/KOL NORTH/2024-25
dated 30.10.2024 passed by the Principal Commissioner of C.G.S.T. and C.E., Central
G.S.T. Kolkata North Commissionerate, G.S.T. Bhawan, 180, Shantipally, Kolkata -
700 107)
M/s. Techno Electric and Engineering Co. Limited : Appellant
1B, Park Plaza, 71 Park Street, Kolkata - 700 016
VERSUS
Principal Commissioner, C.G.S.T. and C.X., : Respondent
Kolkata North Commissionerate,
G.S.T. Bhawan, 3rd Floor, 180, Shantipally, Rajdanga Main Rd.,
Kolkata - 700 107
AND
Service Tax Appeal No. 75329 of 2025
(Arising out of Order-in-Original No. 46-47/COMMR/CGST & CX/KOL NORTH/2024-25
dated 30.10.2024 passed by the Principal Commissioner of C.G.S.T. and C.E., Central
G.S.T. Kolkata North Commissionerate, G.S.T. Bhawan, 180, Shantipally, Kolkata -
700 107)
Mr. P.P. Gupta, Managing Director, : Appellant
M/s. Techno Electric and Engineering Co. Limited
1B, Park Plaza, 71 Park Street, Kolkata - 700 016
VERSUS
Principal Commissioner, C.G.S.T. and C.X., : Respondent
Kolkata North Commissionerate,
G.S.T. Bhawan, 3rd Floor, 180, Shantipally, Rajdanga Main Rd.,
Kolkata - 700 107
APPEARANCE:
Shri Pulak Kr. Saha and Shri Joydeb Bhattacharya, both Chartered Accountants,
For the Appellant(s)
Shri Mihir Ranjan, Special Counsel,
For the Respondent
CORAM:
HON'BLE SHRI R. MURALIDHAR, MEMBER (JUDICIAL)
HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NOs. 77577-77578 / 2025
DATE OF HEARING: 14.10.2025
DATE OF DECISION: 28.10.2025
Page 2 of 61
Appeal No(s).: ST/75328 & 75329/2025-DB
ORDER:[PER SHRI K. ANPAZHAKAN] The captioned appeals have been filed by M/s. Techno Electric & Engineering Co. Limited and their Managing Director, namely, Mr. P.P. Gupta challenging the demands of service tax along with interest and penalty confirmed against them by the Principal Commissioner of C.G.S.T. and Central Excise, Central G.S.T. Kolkata North Commissionerate vide the Order-in-Original No. 46-47/COMMR/CGST & CX/KOL NORTH/2024-25 dated 30.10.2024.
2. The facts of the case are that M/s. Techno Electric and Engineering Company Limited (hereinafter referred to as 'the appellant-company') is a Public Limited Company registered under the Companies Act, 1956 and is also a Company within the meaning of the Companies Act, 2013 having its corporate office situated at 1B, Park Plaza, 71, Park Street, Kolkata - 700016. The appellant has been engaged in execution of EPC contracts for setting up of Power Plants across India. For handling the various projects across India, it maintains location wise project sites and accordingly, for Service Tax compliance, it obtained multiple Service Tax Registrations bearing Nos. AAJCS4414QSD001 to AAJCS4414QSD093 in various States in India for provision of Works Contract Service, Maintenance and Repair Service, etc. 2.1. The appellant-company, since its inception has been engaged in the execution of turnkey contracts for setting up of Power Plants for various Electricity Distribution Authorities (EDAs) being public utilities. The Customers (EDAs) of the appellant invite Tenders wherein they seek separate itemized quotations in the Tender for (i) supply of equipment/spares and for (ii) Page 3 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB rendition of Services. Further, in the tender for rendition of service, the service portion is again divided into (a) Erection, Installation and Commissioning, (b) Construction and Civil Work and
(c) Transportation and Insurance including port handling and ancillary activities.
2.2. During participation in the Tender, the appellant also submits its itemized quotations in the bid document towards the Tender. After successfully qualifying for the tender, the appellant is engaged through a Notification of Award or contracts for each type of activities separately.
2.3. Under the supply contract, as per the condition prescribed, the ownership of the property in the plant/equipment and spares supplied is transferred to the customers at the time of loading the same in the conveyance. All the supplies are F.O.R. destination contract.
2.4. In terms of the executed contracts, based on the accepted price schedule, separate invoices were raised for each of the activities, i.e. (a) Supply of equipment, (b) Erection, installation and commissioning activities, (c) Civil work and (d) Transportation & Insurance.
2.5. In all the contracts, i.e. the Supply contract and Service Contract, there is a cross-fall breach clause that specifies that breach of one contract will be deemed to be a breach of the other contract as well. The cross-fall breach clause would ensure performance of all the contracts and would provide assurance to service recipients that only one individual contract will not be executed as per performance commitments.
Page 4 of 61Appeal No(s).: ST/75328 & 75329/2025-DB 2.6. Under the supply contract, in case of imported equipment, the appellant contracts with the overseas manufacturer of equipment, places orders, arranges ocean freight and marine insurance for equipment, arranges clearance of equipment from Indian Port by engaging CHA, arranges for local transportation and insurance for delivery of equipment at the concerned site of the customers.
2.7. In respect of import of equipment, the appellant pays applicable Customs duties at the time of clearance of the imported equipment. Where the equipment are procured indigenously, the appellant contracts with the manufacturer of equipment, places order, arranges for local transportation and insurance for delivery of the equipment at the concerned site of the customers. Generally the aforesaid purchase and sale of equipment are inter-state purchases. Such sale is a Sale in Transit. The manufacturer of equipments raises invoices on the Appellant and not on the contractees. The Lorry Receipt/Goods Receipts were also in the name of the appellant. The appellant endorses the Lorry Receipts/Goods Receipts in the name of the contractees during transit of the said equipments before the delivery of equipment at the site of the contractees.
2.8. The above referred purchase and sale of equipment are against E-1 Forms under Section 6(2) of the Central Sales Tax Act. In such case, the first sale i.e., between the seller of the equipment and the appellant would be taxable and leviable to Central Sales Tax and the subsequent sale from the appellant to the customers, would be leviable to tax but exempted from making payment on production of the aforesaid Forms.
Page 5 of 61Appeal No(s).: ST/75328 & 75329/2025-DB 2.9. The appellant issues Form C to the seller of the equipment and the seller issues declaration in Form E- 1 to the appellant. During sale of equipment by the appellant to the customer, the customer issues Form C to the Appellant. The appellant has duly included above sales in its respective Sales Tax Returns.
2.10. In case of purchase and sale of equipment that take place intra state, the seller of equipment charges respective State VAT to the appellant and the appellant avails the ITC of such VAT charged. In turn, the appellant charges local State VAT to its customers and pays the same to the respective State Government after adjustment of eligible ITC. The appellant is also regular in filing its periodical State VAT Returns reporting all the aforesaid purchases and sale.
2.11. In addition to supply of equipments contract, the appellant also enters into Service Contracts separately with the customers wherein the scope of service of Construction and Erection of the project would be recorded.
2.12. As per the normal business practice in respect of power projects, the entire Service Contract is divided into three distinct categories, namely:
(a) Erection, Installation and Commissioning (EIC);
(b) Commercial & Industrial Construction (Civil Work);
(c) Transportation / Freight & Insurance.Page 6 of 61
Appeal No(s).: ST/75328 & 75329/2025-DB 2.13. Under the Erection, Installation and Commissioning (EIC) activities the Appellant undertakes the following activities :
(a) Structure Erection;
(b) Equipment Erection;
(c) Establishment of control and protection and PLCC system;
(d) Illumination system erection;
(e) Erection of fire protection and detection system;
(f) Testing and Commissioning of the above activities i.e. (a) to (e).
2.14. Under the Commercial & Industrial Construction (Civil Work) the appellant undertakes the following :
(a) Supply of materials required for Civil Work i.e. Cement, Steel, etc.;
(b) Cleaning and levelling of substation land including excavation and landfilling with gravel;
(c) Construction of internal Roads, Drainage System and Cable Trench.
2.15. Although the Transportation and Insurance is mentioned in the Service Contract, but the same is exclusively relates to the sale of Equipment and Spares and also is incidental to such sale. It is the responsibility of the appellant to transport the Equipment to the worksite by the mode of transport that the appellant deems fit and suitable to the Page 7 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB circumstances as all the contract for Supply is F.O.R. destination contract. The appellant obtains approvals from the customers for transportation of the equipment to the site.
2.16. As per the terms of the contract, the Equipment sold under the Contract of Supply shall be fully insured against loss or damage incidental to manufacture and transportation. Further, in case of goods, the insurance shall be at least for an amount equal to 110% of the cost of the goods.
2.17. The standard practice adopted by the appellant to discharge Service Tax on the Service Contract is as follows: -
(a) Paid Service Tax at full rate without any abatement for material consumed on Erection, Installation & Commissioning activities;
(b) Paid Service Tax at the rate of 40% (after taking abatement of 60% for material consumed) for Civil Work under "Works Contract Service" in terms of the Rule 2A(ii) of the Service Tax (Determination of Value) Rules, 2006 except in few cases;
(c) Did not pay Service Tax on Transportation/Freight & Insurance as the same is incidental to sale of equipment and also on the ground that transportation services rendered by any person other than GTA and courier agency was exempt from Service Tax.
Further Insurance service is not an independent service but incidental to main service of transportation.
Page 8 of 61Appeal No(s).: ST/75328 & 75329/2025-DB 2.18. On the Civil Contracts, the appellant-company has discharged VAT under Works Contract in the respective States as it involved both supply of goods and supply of service.
2.19. The appellant-company also maintains project wise record of the material purchased and used in the Erection, Installation and Commissioning activities and Civil Work.
2.20. The value of material (the bare purchase cost of the material) involved in each project is separately recorded in a project code specifically created for a project site. The value of purchase of such material is recorded in such project code in the ERP system. The appellant maintains detailed record in its ERP system of the material involved in each project site and the same is being systematically tracked and recorded in the system.
3. In late 2016, based on the information received that the appellant-company was not paying Service Tax properly and though was having multiple Service Tax Registrations for activities carried out across India, it maintains its Pan India accounts from its Corporate Office at Kolkata, a search was conducted by the DGGI, Kolkata Zonal Unit on 29.11.2016 at two offices of the appellant-company at Kolkata.
4. After going through the requisite information and documents submitted by the appellant and also based on the deposition given by the senior employees of the appellant, a Show Cause Notice bearing F. No. 254/KZU/KOL/GR.H /ST/ 2016/5902 dated 11.08.2017 covering the period from 01.04.2012 to 30.09.2016 in respect of 45 Service Tax Registrations of the appellant, as mentioned in Page 9 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB the said Show Cause Notice, was issued by the DGGI, Kolkata Zonal Unit, Kolkata. In the aforesaid Show Cause Notice, a proposal was made for demand of service tax (including cess) amounting to Rs.143,82,89,282/-, along with interest thereon under Section 75 of the Finance Act, 1994. Further proposals for imposition of penalties under Sections 77 and 78 were also made; an amount of Rs.25,00,000/- paid by the appellant during the course of investigation was also proposed for appropriation against the aforesaid service tax liability of the appellant. Penalty under Section 78A of the Finance Act,1994 read with Section 174(2) of the CGST Act, 2017 was also proposed to be imposed on Mr. P. P. Gupta, Managing Director of the appellant- company.
4.1. The impugned Show Cause Notice was issued based on the following major allegations :
(i) The activity undertaken by the appellant-
company appears to be one Turnkey Project classifiable under "Works Contract Service"
which has been artificially bifurcated into 'Supply Contract', 'Erection, Installation and Commissioning Service' and 'Commercial or Industrial Construction Service' (Civil Work). The entire project being one Turnkey Project of Works Contract Service, Service Tax on entire contract value is payable under Rule 2A(ii) of the Service Tax (Determination of Value) Rules, 2006.
(ii) The responsibility of overall project lies with the appellant as there is a cross-fall breach clause in all contracts. Though the contracts provided separate price schedule for different Page 10 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB jobs but it did not have any separate liability clause for each of such job according to the price schedule. Therefore, the activity undertaken by the Appellant is one integrated project.
(iii) The entire contract being a bundle of service, it is to be treated as "Single Service" and cannot be disintegrated and classified under several services based on the price schedule of the contract.
(iv) According to the Explanation 1(b) of the Rule 2A(ii) of the Valuation Rules, the value of the goods supplied under same contract or different contract has to be added with gross amount charged to arrive at taxable value of the service.
(v) Transportation, Insurance, Port Handling activities come within the ambit of the term 'Installation Services'.
(vi) The appellant has misclassified composite EPC/Turnkey contract classifiable as Works Contract by vivisecting it into 'Erection, Commissioning and Installation Service' & 'Commercial Construction Service' with intent to evade tax, therefore, extended period of limitation is invokable in the present case.
5. In response to the aforesaid Show Cause Notice, an Interim Reply dated 12.10.2020 was filed by the appellant. The Final Reply to the Show Cause Notice was filed vide letter dated 14.12.2020. An Additional Written Submission dated 05.01.2021 was also filed. Further, a Revised Synopsis dated 19.03.2021 was also filed with the office of the Principal Commissioner of CGST & CE, Kolkata North Commissionerate.
Page 11 of 61Appeal No(s).: ST/75328 & 75329/2025-DB
6. Thereafter, the Notice was adjudicated and the impugned Order-in-Original dated 30.10.2024 came to be passed by the Ld. Principal Commissioner of CGST & CX, Kolkata North Commissionerate confirming the demand of Service Tax amounting to Rs.102,87,35,235/-, charging applicable interest thereon under Section 75 of the Act and imposing an equal amount of tax as penalty under Section 78 of the Act; a penalty of Rs.10,000/- has also been imposed under Section 77 ibid. The Ld. Principal Commissioner also imposed a penalty of Rs.1,00,000/- on Mr. P. P. Gupta, Managing Director of M/s. Techno Electric and Engineering Co. Ltd. under Section 78A of the said Act.
7. Aggrieved by the said order, the appellants have filed the present appeals.
8. The Ld. Counsel appearing on behalf of the appellants herein has advanced various arguments on merits, which can be broadly summarized as under: -
(i) The activity of Supply, Erection, Installation & Commissioning, Civil Work and Transportation & Insurance are inherently independent, distinct and separate to each other. There is in effect, a separate contract for each of the activities.
These distinctly separate contracts cannot be read together to suggest that all constitute a single composite contract of 'Works Contract'.
(ii) The customers invite separate quotations for supply of equipment and for Erection & Installation of those equipment. Each of the activity is clearly distinct in its nature and necessarily requires separate expertise and the bifurcation of the work is absolutely based on Page 12 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB the terms of the tender document. In the case of any Power Project contract, the equipment required are costly and sophisticated. The Erection, Installation and Commissioning of such equipment and Commercial & Industrial Construction (Civil Work) are both clearly distinct jobs and the expertise required to execute both of these jobs are not of like nature. Transport and Insurance services are also provided by the independent service providers. These jobs also involve specialization in its own field. Thus, there is separate commitment for Supply of Equipment and for providing independent services such as undertaking Erection, Installation and Commissioning; Civil Work and Transportation & Insurance of Equipments.
(iii) The appellant further submits that the Contract Price Schedule also mentions price for each of the activities separately. The appellant, as per the contract, raises separate invoices for each such activity indicating the price for the respective activity in terms of the contracted price schedule and gets the payment from the customers accordingly. It therefore, clearly proves that Erection, Installation and Commissioning, Civil Work and Transport & Insurance are also distinct and separate contract as compared to the Supply of Equipments. Even though for Service Contract there is one single instrument, but there are really three distinct agreements for supply of three different services.
Page 13 of 61Appeal No(s).: ST/75328 & 75329/2025-DB
(iv) The appellant-company has discharged applicable VAT/CST on full sale price in respect of sale of the Equipment in all the cases in the respective States.
(v) The appellant has discharged Service Tax at full rate on the value of Erection, Installation and Commissioning activity without any abatement and discharged Service Tax on the value of Civil Work under 'Works Contract Service' in terms of Rule 2A(ii) of the Service Tax (Determination of Value) Rules, 2006.
(vi) The appellant was under the bona fide belief that transportation of goods by road was not taxable unless the same is provided by a GTA or a Courier Agency in terms of Section 66D(p) of the Finance Act, 1994. Since the appellant is neither a GTA nor a Courier Agency as defined under the law, based on the aforesaid bona fide belief, it did not pay any service tax on the transport charges collected from the customers during the relevant period. The appellant further submits that the transportation is the essential character of the 'Transportation and Insurance' contract and hence the entire activity is not liable to Service Tax in terms of Section 66F of the Finance Act, 1994.
(vii) Therefore, the appellant submits that it has correctly discharged the applicable Service Tax liability on each such contract and the case of the Department to treat all the independent activity as one standalone contract is incorrect. Accordingly, the impugned Order-in-Original is liable to be set aside on this ground alone.
Page 14 of 61Appeal No(s).: ST/75328 & 75329/2025-DB
(viii) The legal form of the transaction cannot be ignored while forming an opinion by the Department that all the two independent contracts consisting of four independent activities are for execution of one single contract for Works Contract and accordingly the same would be taxable.
(ix) In the impugned order, the Ld. Adjudicating authority has considered that the contracts between the Appellant and the customers as one single contract for Works Contract. According to the Department, this Works Contract includes the value of equipment and its components, Erection, Installation and Commissioning, Commercial & Industrial Construction (Civil Work) and Transportation and Insurance. Accordingly, the appellant is liable to discharge Service Tax on the entire value of the Works Contract less standard deduction allowed in terms of the Valuation Rules. Therefore, it is clearly evident that the Department wants to tax the appellant by looking into the 'substance of transaction' as perceived by the Department in this case.
(x) The appellant submits that it is a settled legal position that legal form of transaction cannot be ignored and the Department cannot look at the 'substance of the transaction' ignoring the legal effect of the transaction. In the instant case, the Appellant has undertaken supply of equipments under a distinctly separate supply contract. The appellant therefore submits that, the legal effect created by virtue of the separate supply and service contracts in the name of the Appellant Page 15 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB cannot be overlooked or ignored and brushed aside at the will of the Department to levy service tax on the independent supply contract which has suffered the applicable VAT/CST.
(xi) The appellant further submits that both the contracts are separately numbered, with different price schedules. Their terms and conditions, performance requirements, guarantees, etc. are also separately described. Thus, by no stretch of imagination it can be concluded that both supply and service contracts are single contract of composite Works Contract. Therefore, the contention of the Department is completely baseless and absolutely out of surmise and accordingly the impugned order confirming the demands of service tax along with interest and penalty is liable to be set aside.
(xii) The appellant states that the Ld. adjudicating authority confirmed the demand purely based on the fact that there is cross-fall breach clause in all the contracts. Because of this cross-fall breach clause, the responsibility of the overall project lies with the appellant. Therefore, the activities undertaken by the Appellant is one integrated project and not a separate one. Therefore, as per the Ld. adjudicating authority only because of existence of cross fall breach clause in both the contracts, two independent contracts, one for supply of goods and one for provision of service are one single works contract and accordingly the value of supply of goods for which separate independent invoices raised by the appellant in Page 16 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB terms of the respective work orders after discharging the applicable VAT/CST was included for determination of the gross value of the works contract service and accordingly the service tax demand was computed in the impugned Order-in-Original.
(xiii) The appellant submits that the cross-fall breach clause is included into any EPC/Turnkey project contracts to ensure complete performance of both the contracts. Only because of inclusion of cross-fall breach clause cannot automatically make all the independent contracts an indivisible Works Contract.
(xiv) It is submitted that the cross-fall breach clause in each of the two contracts i.e. one in supply of the main equipment and the other in service contract was to ensure that the completion of the project was not frustrated by any failure on the part of the contractor to perform any of his obligations in either contract and that the project in its entirety with all the required specifications was completed within the fixed time schedule.
(xv) The cross-fall breach clause between the two contracts can only have the effect that any breach of the conditions in one contract will amount to the breach of the conditions in the other contract.
(xvi) Any contract may be a compendium of diverse responsibilities both on the part of the contractee and of the contractor. Breach on either side may invite civil liabilities. It is not only the contractor that is liable for stipulated Page 17 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB breach, but equally the contractee has to discharge his obligations. Such common clauses for damages do not make two contracts as one contract.
(xvii) In any contract there are modes for settling the disputes including process of notices, mutual consultations, arbitration and civil suits for damages. These are to protect the interest of both the sides. Cross-fall breach mechanism in the realm of law of contracts is to ensure fulfilment of contractual obligations on one or more than one party. It has no bearing on tax liabilities of those who are obliged to pay due taxes under the authority of law.
(xviii) Such a stipulation cannot lead to the negation of the constitutional scheme of distribution of legislative powers between the Union and State qua the mutually exclusive Lists (I & II) and disturb the exclusivity of the powers to levy and collection of taxes on services by the Centre, and on sale/supply of goods by the State.
(xix) The linkage of the two contracts one concerning supply of equipment (including transfer of property in goods in the work contract-services) exclusively within the legislative competence of the concerned State Government and the other concerning provision of services within the legislative competence of the Union Government, by the cross-fall breach clause in the two contracts cannot make two contracts as one Works Contract for the levy of Service Tax.
(xx) The appellant in this regard relies upon the decision in the case of State of Karnataka Vs Page 18 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB Transglobal Power Limited - [(2014) VIL. 348 (Kar.)] wherein the contracts between M/s. Karnataka Power Transmission Corporation Limited (Contractee) and M/s. Transglobal Power Limited (Contractor) has a cross-fall breach clause. In this case, the Hon'ble High Court has held that the intention behind insertion of the cross-fall breach clause in the contracts was to see that the contractor did not wriggle out of the situation by non-performance of any portion of the contract, and that the object of entering into the contract was not frustrated. It was held that the levy of tax will be on the basis of the legal provisions.
(xxi) The appellant also places reliance on the decision of the Hon'ble Supreme Court in the case of Uttar Pradesh Power Transmission Corporation (UPPTC) & ANR. Vs. CG Power and Industrial Solutions Limited & Anr. Special Leave Petition (C) No. 8630 of 2020. In this case, the Respondent had obtained an order from UPPTC for construction of 765/400 KV Sub-stations at Unnao, Uttar Pradesh on a turnkey single point responsibility basis, for which the parties had entered into four separate contracts. The First Contract was for supply and delivery of equipment and materials, the Second Contract was for handling, erection, testing and commissioning works, the Third Contract was for civil works and Fourth Contract was for operation and maintenance for three years. The CAG during the audit alleged that "building cess" as per the Building and Other Construction Workers' (Regulation of Employment and Conditions of Service) Act.
Page 19 of 61Appeal No(s).: ST/75328 & 75329/2025-DB 1996 and the Building and Other Construction Workers' Welfare Cess Act, 1996 (Welfare Cess Act), was not collected and deposited by the Respondent vis a vis the First Contract for supply and delivery of equipment and materials. However, the Hon'ble Supreme Court held that there are four separate contracts executed between the parties, and that the 'cess' was only payable in respect of the Third Contract, which covered civil works and not the First and the Second Contracts, which cover all works other than civil works. The Hon'ble Supreme Court also agreed with the arguments put forward by the Respondent that :
" the four contracts had been treated as singular contract solely for the purposes of responsibility for timely execution. For all other intents and purposes, including levy of tax or fees, the contract for supply was understood by the parties as a separate and distinct contract." [Para 55] The above decision of the Supreme Court also implies that the Apex Court has in fact, upheld such splitting of turnkey contracts into multiple interconnected contracts in a large construction project, exactly similar to the present case, and also treating the same as separate contracts for tax purposes.
(xxii) Thus, placing reliance on the above decisions, the Appellant submits that a divisible contract cannot be leviable to Service Tax as indivisible works contract merely on the basis of the Cross-
fall Breach clause in the contracts.
(xxiii) The appellant submits that the issue involved in the present case is also settled by the CESTAT, Allahabad in the case of Bharat Heavy Page 20 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB Electricals Ltd. Vs. Commissioner, Central Excise Noida-II [2018 (12) TMI 378]. The appellant submits that the ratio of the aforesaid decision is squarely applies in the facts of the present case. Further the facts involved in the present case are on much better footing as in the present case the Appellant has discharged service tax on full value of the Erection, Installation and Commissioning contract. Hence the demands confirmed in the impugned order is liable to be set aside on this count alone.
(xxiv) Therefore, placing reliance on the above decisions, the appellant submits that a divisible Contract cannot be leviable to service tax as Indivisible works contract merely basis the existence of Cross-fall breach clause in the contracts.
(xxv) The appellant submits that the whole of the EPC/Turnkey contract is not liable to Service Tax. The liability for payment of Service Tax has to be culled out after identifying the taxable service components from each of them.
(xxvi) EPC/Turnkey contracts are divisible contracts for conceptualizing the project, supply of equipment, machinery, infrastructure, services of different nature/categories and a number of other activities which may or may not involve tax liabilities. Only when and to the extent, the transfer of property in goods is involved in the execution of the contract and such transfer of property in such goods is leviable to tax as sale of goods, such projects and contracts become taxable to Service Tax as a Works Contract. The appellant stresses that the Works Contract Page 21 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB is only a part of EPC contracts and it is fallacious to conclude that all EPC contracts are one single Works Contract.
(xxvii) It is submitted that any contract will be treated as Works Contract only when the goods and articles are so integrated with a work that such goods and articles cannot be separately taxed for the purposes of VAT/Sales Tax.
(xxviii) The appellant further submits that in respect of the goods sold as chattel, appropriate VAT/CST is payable. There is no question of payment of any service tax on the sale of goods as chattel. The question of same contract or separate contract will arise only when they relate to the Works Contract. Separate independent contract for supply of goods cannot be inserted into another completely separate contract for providing services.
(xxix) Moreover, in the present case, the relevance of transfer of property in goods arises only with regard to the materials, such as, cement, steel, brick, sand, aggregate, etc. used in execution of service of Civil Construction Work and not in regard to pure supply of equipments.
(xxx) The contracts for Erection, Installation and Commissioning Service and for Commercial & Industrial Construction (Civil Work) are said to be Works Contract. Therefore, the valuation for the purpose of determination of taxable value of the service involved shall be only in relation to Erection, Installation and Commissioning Service and for Commercial & Industrial Construction (Civil Work) services. Whereas, in Page 22 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB the impugned order, the Ld. Adjudicating authority has sought to enhance the two contracts to include the sale of equipment within its ambit for the purpose of deriving the taxable value. Therefore, the issue is to determine whether the value of equipment sold under a separate contract can be part of the value of Erection, Installation and Commissioning Service and for Commercial & Industrial Construction (Civil Work) services alleging the same to be a composite works contract.
(xxxi) The appellant submits that from the executed contracts for Supply of Equipments, it is evident that the appellant is selling the equipment to the customers distinctly and the transfer of property in the equipment also passes to the customer the moment the same is loaded in the conveyance.
(xxxii) It is further submitted that all such equipments/materials once sold to the customers, are provided back to the appellant for erection purpose after executing an indemnity bond in favour of the owner against loss, damage and any risk involved, for the full value of the Equipment/materials.
(xxxiii) The appellant contends that it is an incontrovertible fact that there was distinctly separate transaction for supply of goods for which separate invoices were also raised by the appellant as per the agreed price schedule in terms of the tender. Those goods were handed over to the purchaser separately for consideration before their use under a distinct transaction of Erection, Installation and Page 23 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB Commissioning and Commercial Industrial Construction in which even the goods already belonging to the owner could be used.
(xxxiv) The appellant further submits that in terms of the decision in Bharat Sanchar Nigam Ltd. [2006 (2) S.T.R. 161 (S.C.)] and the succeeding judgements, the case of composite activity, the following two tests are to be sequentially applied to determine the applicable levy of tax :
(a)In the event, it is the intention of the parties to treat the composite contract as comprising of a separate sale contract and a separate service contract, and different rights are therefore ascribed to each such contract, the sale of goods would be chargeable to VAT/CST and the service portion would attract the levy of Service Tax;
(b)In the event that no such intention can be inferred, the true nature of the composite contract would have to be determined as per the dominant nature test.
(xxxv) The appellant submits that in the instant case, the Department has entirely failed to appreciate the above two separate tests laid down by the Hon'ble Apex Court. The appellant submits that, in line with the position laid down by the Hon'ble Supreme Court, it ought to have first been ascertained whether, on a consideration of the contracts and the concomitant aspects of the transactions, the intention of the parties was to treat the supply Page 24 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB of Equipment as a sale activity or as part of provision of Works Contract Service.
(xxxvi) In view of the facts mentioned above based on the executed contracts with the customers, the appellant submits that it proves beyond doubt that the appellant always has the intention to treat the supply of equipments as a separate contract for supply only. Therefore, in any case, the value of equipment sold under a distinct supply contract cannot be included in the value of Works Contract for levy of Service Tax.
8.1. Without prejudice to the above, the Ld. Counsel for the appellant has tendered the following submissions on the ground of limitation: -
(i) The appellant states that the impugned Show Cause Notice was issued on 11.08.2017 covering the period from 01.04.2012 to 30.09.2016 by invoking the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994. Therefore, the period from 01.04.2012 to 30.09.2014 is hit by limitation.
(ii) The proviso to Section 73(1) can be invoked only in situations where any Service Tax has not been levied or paid or has been short levied or short paid or erroneously refunded by reasons of fraud, collusion, wilful misstatement, suppression of facts or contravention of any of the provisions of the Act or of the rules made thereunder with an intention to evade payment of Service Tax.
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(iii) The extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994 can be invoked only if suppression, willful misstatement occurs due to deliberate evasion of tax on part of the assessee, It is clear that such act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to avoid payment of duty.
(iv) The concept of suppression has been dealt with at length in the case of Lakshmi Engg. Works Vs. CCE [1989 (44) ELT 353] by the Hon'ble Apex Court wherein it has been held that the concept of suppression amounts to that which one is legally to state but one intentionally or deliberately or consciously does not state. In other words, the term 'suppression' includes a mental element to deliberately omit to state certain thing. It was therefore, held that the extended period of limitation is inapplicable in absence of suppression of facts and hence, absence of an intent to evade payment of duty. The same principle was also upheld by the Hon'ble Supreme Court in the case of Pushpam Pharmaceuticals Company Vs. CCE [1995 (78) ELT 401 (S.C.)]
(v) The appellant in this regard further relies upon the decisions of the Hon'ble Supreme Court in the case of Uniworth Textiles Ltd. Vs. CCE, Raipur [2013 (31) Taxmann.com 67 (S.C.)] wherein the Apex Court observed and held that "Every non-payment /non-levy of duty does not attract extended period, there must be deliberate default. The conclusion that mere Page 26 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB non-payment of duties is equivalent to collusion or willful misstatement or suppression of facts is untenable. If that were to be true, then it was beyond understanding, which form of non- payment would amount to ordinary default."
(vi) The appellant submits that the Department at the time of issue of the impugned Show Cause Notice, could not bring on table any cogent evidence to prove that there was existence of at least one of the required situations to enable the Department to invoke the longer period. Whereas, it is an incontrovertible fact on record that the appellant all along considered Supply Contract as pure Supply of goods and accordingly discharged applicable VAT/CST in the respective States. Service Contracts were treated as independent Service Contracts and the appellant discharged Service Tax at the applicable rate where applicable. The appellant submits that it was under bona fide belief that the Contract for Supply of Equipment is pure sale of goods and therefore, this transaction is outside the purview of Service Tax.
(vii) The present issue is a pure case of interpretation of law as is evident from the submission made hereinabove. It is the interpretation of the appellant based on the reasonable understanding of law that the value of the pure sale transaction shall not be included in the taxable value of service, whereas the view of the Department is otherwise. If such view of the of the Department is upheld, then there would not be any case with normal period of limitation. If every non-payment is necessarily Page 27 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB by indulging suppression of fact or contravention of the provisions of the law, then it is beyond understanding which non-payment the department shall consider to be non- payment not by reason of suppression of fact or contravention of the provisions of the law.
(viii) The appellant is a reputed listed public limited company with all India presence dealing with mainly public sector undertakings engaged in large power projects in India. The appellant submits that all transactions are duly recorded in its books and such books are statutorily audited by a reputed Chartered Accountants Firm. All the locations duly registered with the Jurisdictional Service Tax Authority and have been regular in filing its periodical Service Tax Returns with the respective Jurisdictional Service Tax Authority. Regular departmental audits were carried out in different locations and never the Department raised any objection whatsoever in this regard. This is the first time the Department came out with a different opinion on the same activity being carried out by the appellant for a long period.
(ix) The appellant further submits that the present matter involves interpretation of law. The issue regarding taxation of EPC contracts is a subject matter of litigation under the State VAT Law as well as under the Finance Act, 1994. Therefore, in such a situation, the allegation of contravention of provisions of law with the intent to evade tax is not at all tenable. The appellant relies upon the following decisions in support of the contention that mala fide cannot Page 28 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB be alleged when the matter involves interpretation of legal provisions :
(a) Chemicals & Fibres of India Limited Vs. Commissioner [1988 (33) ELT 551 (Tri-Del)]
(b) Ispat Industries Limited Vs. Commissioner [2006 (199) ELT 509 (Tri-Mum)]
(c) NRC Limited Vs. Commissioner [2007 (209) ELT 22 (Tri-Del)]
(x) The appellant submits that the present case, without any doubt involves a pure question of interpretation of law. The view taken by the appellant based on the various judicial pronouncements could also be a possible view.
Therefore, the allegation that the appellant had an intention to evade payment of Service Tax is legally unsustainable. Accordingly, the appellant submits that extended period of limitation cannot be invoked in the present case and hence the part of the demand from 01.04.2012 to 30.09.2014 proposed in the present Show Cause Notice is barred by normal period of limitation as provided in Section 73(1) of the Finance Act, 1994. To this extent Show Cause Notice is liable to be dropped on this ground alone.
(xi) It is further submitted that the burden of proof for establishing the ground for invocation of extended period of limitation is on the Department. The impugned order has not bring out the reasons for invoking extended period of limitation. In this regard reliance is placed on the following decisions :
Page 29 of 61Appeal No(s).: ST/75328 & 75329/2025-DB
(a) Cosmic Dye Chemicals Vs. Commissioner [1995 (75) ELT 721 (SC)]
(b) Commissioner Vs. HMM Limited [1995 (76) ELT 497 (SC)]
(c) Kaur & Singh Vs. Commissioner [19978 (94) ELT 289 (SC)]
(xii) The appellant states that a separate Show Cause Notice bearing F. No. DGGI/GZU/Gr.-
F/Inv/552/19-20/2538 to 2543 dated 16.09.2020 was issued on the appellant covering the period from 01.10.2014 to 30.06.2017 by the DGGI, Gurugram Zonal Unit. In the said Show Cause Notice the Department has proposed to demand Service Tax at full rate on Transportation & Insurance Charges on the ground that the two activities viz.
Transportation and Insurance are distinct services from the other Service Contracts. Whereas, in the present Show Cause Notice, the entire Service Contract along with the supply contract has been treated as one Single Turnkey Contract. The Department itself has taken contradictory positions in two different Show Cause Notices even there was some overlapping period (01.10.2014 to 30.09.2016) included in the second Show Cause Notice in spite of the fact there was no change in the operation of the contracts in both the periods. From these incontrovertible facts on record, it is clear that the Department itself was not sure about the correct taxability of the transaction. In view of the above, the false allegation of the Department that the appellant has intentionally contravened the provisions of the Act with the intention of evasion of Service Tax is not at all tenable under the law and on this ground alone Page 30 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB the demands confirmed in the impugned order is liable to be set aside.
(xiii) In view of the above submission, extended period of limitation cannot be invoked in the instant case. Therefore, the demand of Service Tax pertaining to the period from April, 2012 to September, 2014 is time barred and cannot be enforced.
8.2. With regard to the imposition of penalties in the impugned order, the following submissions have been made by the Ld. Counsel for the appellants: -
(i) The impugned Order-in-Original has imposed equivalent amount of penalty on the appellant-
company under Section 78 of the Finance Act, 1994 on the ground of non-payment of Service Tax by suppression of facts with a mala fide intention.
(ii) It is contended that penalty under Section 78 of the Act can be imposed only under the situation when service tax was not paid by reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provisions of the law. From the above submission it is clear that the Appellant has always been and is still under the bona fide belief that it is not liable to pay Service Tax in the alleged manner. Furthermore, the appellant never suppressed any fact relating to the activities carried on by it, lest with an intention to evade payment of Service Tax. The appellant has always co-operated with the Department in their proceedings and always provided the details asked by them. Furthermore, the entire Page 31 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB demand was computed based on the data provided by the appellant from its annual audited accounts. The Department could not add any figure neither unearth any figure which could be treated as suppression. Thus there was no suppression at all in the hands of the appellants. Therefore, no penalty is imposable under Section 78 on the appellant-company.
(iii) Reliance is placed on the decision of the Tribunal in the case of Eversmile Pre-Fab Private Limited v. Commissioner [2010 (262) ELT 801] wherein the Tribunal held that as the grounds for invocation of extended period of limitation and those for imposition of penalty are same, no penalty can be imposed as the grounds for invoking extended period of limitation do not exist.
(iv) The appellant submits that from the submission made hereinabove, it is undoubtedly clear that none of the contraventions specified under Section 77(1) of the Finance Act, 1994 was carried out by the appellant for imposing penalty under Section 77. Therefore, imposition of penalty of Rs.10,000/- by the Ld. Adjudicating Authority invoking Section 77 of the Act is completely bad in law and therefore liable to be set aside.
(v) For the same reasons, the penalty of Rs.1,00,000/- imposed on Mr. P.P. Gupta, Managing Director of the appellant-company under Section 78A of the Finance Act, 1994 is unjustified and illegal and is liable to be set aside.
Page 32 of 61Appeal No(s).: ST/75328 & 75329/2025-DB 8.3. In view of the submissions made hereinabove, the Ld. Counsel appearing on behalf of the appellants prays for setting aside the impugned Order-in-Original dated 30.10.2024 passed by the Ld. Principal Commissioner of CGST & CX, Kolkata North Commissionerate, with consequential relief to the appellants.
9. On the other hand, the Ld. Special Counsel representing the Revenue has made various submissions, which are as follows: -
Preliminary Objection:
(i) A single Appeal filed by the Corporate Office of M/s. Techno Electric and Engineering Co No Ltd.
against the Order-in-Original 46- 47/COMMR/CGST & CX/KOL NORTH/2024-25 dated 30.10.2024 passed by the Principal Commissioner, CGST North Kolkata, confirming service tax liability against its 45 separately service tax registered units is not maintainable.
(ii) The Directorate General of Goods and Service Tax Intelligence (DGGI), Kolkata Zonal Unit, conducted an all-India investigation against 45 working sites located across India of M/s Techno Electric and Engineering Co Limited, having its corporate office at 1B, Park Plaza Kolkata, each separately registered under the erstwhile Service Tax law.
(iii) The Additional Director General DGGI KZU Kolkata issued A Show Cause Cum Demand Notice DGCEIF No 254/ KZU/KOL/GR.H/ST/2016/5902 dated 11.08.2017 covering 45 service tax registered sites, alleging short payment of service tax Page 33 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB under various taxable categories. Additionally, Shri P.P. Gupta, Managing Director of M/S Techno Electric and Engineering Co. Limited, was another noticee against whom a penalty under Section 78A of the Finance Act 1994 was proposed in the said notice.
(iv) By order of the competent authority, the Commissioner of CGST, North Kolkata, was appointed as the common adjudicating authority for all noticees who have passed the impugned order dated 30.10.2024, which has been assailed in the present appeal by the corporate office of M/s Techno Electric and Engineering Co. Limited.
(v) The Order-in-Original, inter alia, in paragraph 9.1 confirmed separate service tax demands against each of the 45 registered assessees having separate STC No as detailed in column (7) of paragraph 8.18 of the impugned order. Shri P.P. Gupta was penalised Rs 1,00,000 under Section 78A of the Finance Act, 1994. Unit having STC No AAJCS4414QSD086 was imposed a penalty of Rs 10,000/ under Section 77 of the Finance Act, 1994 for non-filing of ST- 3 returns.
(vi) The corporate office has filed the present appeal before the CESTAT, Kolkata, against the said impugned order dated 30.10.2024. The 45 other registered units have not filed any separate appeals.
(vii) The issue, therefore, is whether a single appeal filed by the corporate office is maintainable before the CESTAT in respect of the impugned Page 34 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB order dated 30.10.2024 confirming separate tax demands against multiple service tax registrants, or whether each registered unit was required to file separate individual appeals.
(viii) The respondent submits the following statutory provision to argue that the single appeal filed by the Corporate Office is not maintainable.
Relevant Statutory Provisions Section 86(1), Finance Act, 1994:
Any assessee aggrieved by an order passed by a Commissioner of Central Excise under section 73 or section 83A may appeal to the Appellate Tribunal.
Section 65(7), Finance Act, 1994 Definition of Assessee:
"Assessee" means a person liable to pay service tax and includes his agent.
Rule 4(2), Service Tax Rules, 1994:
Where a person has more than one premises from which taxable services are provided, he shall make a separate application for registration in respect of each premises, except where he has a centralised billing or centralised accounting system.
(ix) In the present case, the Show Cause Notice was issued to all 45 registered entities, and the Order-in-Original determined distinct liabilities against each one of them. The adjudicating authority may be common, but the cause of action and the quantum of demand for each registered unit are independent. Under Section Page 35 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB 86, only the assessee against whom an order has been passed can prefer an appeal.
Therefore, each registered unit (being separately registered) must file its own appeal if aggrieved by the order. The corporate office cannot represent or maintain an appeal on behalf of other separately registered assessees, unless those registrations were merged under Rule 4(2) into a centralised registration. In the present case, since all 45 sites were registered independently and the order confirmed demand separately against them, a single composite appeal by the corporate office is not legally maintainable for all units. Hence, the Service tax appeal No. ST/75328/2025 filed by the corporate office deserves to be dismissed on this ground alone.
Submissions on merits:
(i) The Impugned order has been passed after a Detailed examination of the contract documents, Multiple opportunities for personal hearing, and consideration of the appellant's written submissions and relied upon case laws.
(ii) The findings of the Ld. Adjudicating Authority are consistent with settled Judicial precedents, including Larsen & Toubro Ltd. v. Commissioner of C.Ex., Pune-II [2014 (34) S.T.R. 481 (S.C.)] and Ircon International Ltd. v. CST, Delhi [2017 (5) G.S.T.L. 221 (Tri.-Del.)]
(iii) The appellant has raised the following broad grounds: (a) That separate supply and service contracts cannot be treated as a single works Page 36 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB contract merely due to the cross-fall breach clause, (b) That valuation under Rule 2A(ii) of the Service Tax (Determination of Value) Rules, 2006 is incorrect, (c) That the extended period of limitation under Section 73(1) proviso was wrongly invoked, and (d) That penalty under Sections 77 and 78 is not sustainable as the issue involves interpretation of law.
Ground: Misclassification of Contracts Works Contract" "Composite Turnkey
(iv) The OIO correctly held that the contracts for supply and service were inseparable parts of a single turnkey EPC project, executed with cross- fall breach obligations. Para 8.3.5 and 8.11 of the OIO clearly record that failure in one contract automatically renders the other void, thereby evidencing mutual interdependence and commercial indivisibility.
(v) The definition of "works contract" under Section 65B(54) of the Finance Act, 1994 expressly includes "turnkey projects including engineering, procurement and construction or commissioning projects". Hence, such EPC projects fall squarely within the statutory definition.
(vi) The Hon'ble Supreme Court in Larsen & Toubro Ltd. (supra) held that where a contract involves both transfer of property in goods and provision of service, and the two are inseparable, it constitutes a composite works contract taxable under service tax.
Page 37 of 61Appeal No(s).: ST/75328 & 75329/2025-DB
(vii) The cross-fall breach clause is not a mere formality but a binding covenant that ensures holistic completion of both supply and service obligations as a single deliverable unit. Therefore, the OIO rightly held that these were turnkey composite contracts, not divisible supply/service agreements.
(viii) The appellant's reliance on State of Karnataka v. Transglobal Power Ltd. [2014 VIL 348 (Kar)] is misplaced since that judgment was rendered under the Karnataka VAT Act and not under the Finance Act, 1994; the scope and legislative field are distinct.
Ground: Effect of Cross-Fall Breach Clause
(ix) The OIO has elaborately analysed this at Paras 8.2 to 8.12, holding that the cross-fall breach clause evidences that the contracts were functionally and legally linked.
(x) The Ld. Commissioner's finding is consistent with the legal principle that substance prevails over form where two contracts are so intrinsically connected that performance of one depends on the other, they cannot be artificially separated for tax purposes.
(xi) The appellant's argument that two contracts belong to different legislative fields (State and Union) is untenable because:
- Service tax was levied only on the service portion of the works contract;Page 38 of 61
Appeal No(s).: ST/75328 & 75329/2025-DB
- The Department raised no VAT demand on the goods portion; and
- Rule 2A itself provides for the deduction of the value of goods in computing taxable service value.
Therefore, the contention that the order disturbs constitutional separation of powers is misconceived.
Ground: Valuation of works Contract under Rule 2A(i) or Rule 2A(ii) of the Service Tax Determination of value Rules, 2006:
(xii) The Ld. Adjudicating Authority in the impugned order has discussed the issue in detail in para 8.13 to 8.16, which the respondent would like to reiterate. Further, he has also considered the appellant's claim of arithmetic errors, wherever it was found justified.
Ground: Extended Period of Limitation
(xiii) The OIO at Para 8.19-8.20 clearly records that the appellant did not disclose the linkage of contracts, did not include supply contract values while filing ST-3 returns, and did not classify the turnkey projects under "Works Contract Service. "The omission of material facts, despite awareness of their tax implications, constitutes suppression of facts with the intent to evade payment, thereby justifying the invocation of the extended period under the proviso to Section 73(1).
Page 39 of 61Appeal No(s).: ST/75328 & 75329/2025-DB
(xiv) Judicial precedents such as Nizam Sugar Factory v. CCE, A.P. [2006 (197) E.L.T. 465 (S.C.)] and Continental Foundation Jt. Venture v. CCE [2007 (216) E.L.Τ. 177 (S.C.)] have upheld extended limitation in similar cases of mis declaration and non-disclosure.
Penalty under Sections 77 and 78
(xv) Penalty under Section 77 was imposed for failure to file returns. Penalty under Section 78 was rightly imposed since there was an apparent misstatement and suppression of the taxable value by splitting supply and service invoices. The plea of "interpretation of law" is untenable because the appellant's conduct shows conscious exclusion of supply value despite having prior departmental audits and multiple registrations.
9.1. In view of these submissions, the Ld. Special Counsel for the Revenue prays for dismissal of the instant appeals and upholding the impugned Order-in- Original dated 30.10.2024 passed by the Ld. Principal Commissioner of CGST & CX, Kolkata North Commissionerate.
10. Heard the parties and perused the case records.
11. Before going into the merits of the case, we proceed to examine the preliminary objection raised by the Revenue during the course of arguments.
11.1. The Ld. Special Counsel appearing on behalf of the Revenue has taken the preliminary objection on that ground that the demand has been confirmed against 46 Noticees, whereas one single Appeal has Page 40 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB been filed by one entity, the headquarters of the appellant company. One more Appeal has been filed by the 46th Noticee. He submits that in terms of Explanation (2) to Rule 6A of CESTAT Procedure Rules, 1982, the Appeals should have been filed by the 45 Noticees individually. For ready reference, the relevant portion of the said Rule 6A is reproduced below :
"RULE 6A. The number of appeals to be filed.
................................
Explanation. - (1) .............................
(2) In case an impugned order is in respect of more than one persons, each aggrieved person will be required to file a separate appeal (and common appeals or joint appeals shall not be entertained)."
11.2. The Ld. Counsel appearing on behalf of the appellants submits that since the appellant-company was having several units in different states, dealing with services related to immovable property, they had to necessarily take individual Registrations in those states rather than at the Corporate Office as a Centralized Registration. He has pointed out that at the Corporate Office the accounts of all the units are consolidated and one single Profit & Loss Account and Balance Sheet is maintained. One single PAN number has been granted to the Appellant (Corporate Hqrs.). He also points out that at Paragraph 9.1 (1) of the impugned order, the confirmed demand of Rs.102,87,35,235/- has clearly mentioned specifying that this amount belongs to various different units of Page 41 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB M/s. Techno Electric and Engg. Co. Ltd. operating under various Service Tax Registrations and therefore, he submits that the ultimate liability rests on the Corporate as a whole. Hence, he justifies the single Appeal filed by the Corporate Office.
11.3. We have gone through the factual details and find that the Appeal bearing No. ST/75328/2025 has been filed by the Corporate Headquarters of the Appellant M/s. Techno Electric and Engg. Co. Ltd., wherein the Accounts of all the 45 Units are maintained. The Accounts are consolidated and a single Balance Sheet is prepared at the end of the Financial Year. Irrespective of the fact that the demand is confirmed against various units of the same company, the final liability to pay the confirmed demand, if any, would lie with the Headquarters. So far as Explanation (2) to Rule 6A is concerned, we do agree that each one person is required to file the Appeal, but this is required wherein the persons are different entities by name as individuals or firms, etc., who are other than the main Noticee. In the present case, the appellant-company is operating under one single PAN Number. Therefore, we do not see as to why the appellant-company herein should be made to file 45 separate appeals when the issue is common and the Head quarters is responsible for the outcome.
11.4. Therefore, we do not find merit in the submissions of the Ld. Special Counsel for the Revenue and take the view that the Appeal filed by the Corporate Office is sufficient for them to continue the litigation. Accordingly, we reject the preliminary objection of maintainability of the appeals raised by the Respondent and hold that the appeal filed by the headquarters is maintainable.
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12. Regarding the merits of the case, we observe that the appellant-company were awarded turnkey contracts for setting up of Power Plants by various Electricity Distribution Authorities (EDAs). The Customers (EDAs) of the appellant invited Tenders wherein they sought separate itemized quotations in the Tender for (i) supply of equipment/spares and for
(ii) rendition of Services. Further, in the tender for rendition of service, the service portion is again divided into (a) Erection, Installation and Commissioning, (b) Construction and Civil Work and
(c) Transportation and Insurance including port handling and ancillary activities. Thus, the appellant was of the view that whole of the EPC/Turnkey contract was not liable to Service Tax.
12.1. The appellant has considered the contract for sale of equipment as a separate contract and not paid service tax on the said value on the ground that CST/VAT had been paid at the time of sale of the said equipment. However, the Departmental Officers were of the view that the appellant had artificially divided the contract into two contracts with a view to pay service tax only on the service contract. The Department cited the cross-fall breach clause available in the contract and contended that the said Clause is not a mere formality but a binding covenant that ensures holistic completion of both supply and service obligations as a single deliverable unit. The entire project being one Turnkey Project of Works Contract Service, the Department was of the view that Service Tax on entire contract value is payable under Rule 2A(ii) of the Service Tax (Determination of Value) Rules, 2006. Accordingly, the Ld. adjudicating authority has held that these were turnkey composite contracts and the same cannot be divided into supply Page 43 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB and service agreements, as they are so intrinsically connected that performance of one depends on the other. Accordingly, in the impugned order it has been held that the contracts cannot be artificially separated for tax purposes.
12.2. In this regard, after going through the various submissions made by both sides, we do not agree with the findings of the Ld. adjudicating authority that the contracts have been artificially separated for tax purposes. We find that the EPC/Turnkey contracts are divisible contracts for conceptualizing the project, supply of equipment, machinery, infrastructure, services of different nature/categories and a number of other activities which may or may not involve tax liabilities. In this regard, it is relevant to note that when transfer of property in goods is involved in the execution of the contract and such transfer of property in such goods is leviable to tax as sale of goods, such projects and contracts become taxable to Service Tax as a Works Contract. Thus, we observe that the Works Contract is only a part of EPC contracts and it is fallacious to conclude that all EPC contracts are one single Works Contract.
12.3. With regard to the contract for sale of equipment, we observe that the same is a separate contract wherein CST/VAT has been paid on the sale of goods. For ease of reference, sample copy of few of the invoices pertaining to sale of equipments/materials is extracted below: -
Page 44 of 61Appeal No(s).: ST/75328 & 75329/2025-DB ▪ Invoice No. NTPC/KUDGI/HSS/01 dated 29.06.2015:Page 45 of 61
Appeal No(s).: ST/75328 & 75329/2025-DB ▪ Invoice No. HINV/14-15/JUN/0034 dated 27.06.2014:Page 46 of 61
Appeal No(s).: ST/75328 & 75329/2025-DB 12.3.1. In the present case, the appellant has sold the goods on Inter-State Sale and accordingly, the sale of the equipment/materials is exempted on production of Forms C and E1. In view of the invoices submitted by the appellant, a few of which have also been extracted above, it is clear that all the equipment/materials sold, though exempted, are all goods on which CST/VAT is applicable. Hence, from the above it is clear that no service tax is payable on the value of equipments/materials, on which CST/VAT is applicable or paid/payable.
12.4. We also observe that all such equipments/materials, once sold to the customers, are provided back to the appellant for erection purposes after executing an indemnity bond in favour of the owner against loss, damage and any risk involved, for the full value of the said equipment/materials. In view of the above said factual position, we agree with the submission of the appellant that a separate independent contract for supply of goods cannot be inserted into another completely separate contract for providing services.
In the instant case before us, we observe that the relevance of transfer of property in goods arises only with regard to the materials, such as, cement, steel, brick, sand, aggregate, etc., used in execution of service of Civil Construction Work and not in regard to pure supply of equipments. Accordingly, we are of the considered view that the appellant has rightly not included the value of sale of equipment to the customers for the purpose of payment of service tax.
Page 47 of 61Appeal No(s).: ST/75328 & 75329/2025-DB
13. We also find that in addition to the supply of equipments contract, the appellant also enters into Service Contracts separately with the customers wherein the scope of service of Construction and Erection of the project would be recorded. As per the normal business practice in respect of power projects, the entire Service Contract is divided into three distinct categories, namely:
(a) Erection, Installation and Commissioning (EIC);
(b) Commercial & Industrial Construction (Civil Work);
(c) Transportation / Freight & Insurance.
13.1. It is seen that the appellant has adopted the following practice for discharging service tax:
(a) Paid Service Tax at full rate without any abatement for material consumed on Erection, Installation & Commissioning activities;
(b) Paid Service Tax at the rate of 40% (after taking abatement of 60% for material consumed) for Civil Work under "Works Contract Service" in terms of the Rule 2A(ii) of the Service Tax (Determination of Value) Rules, 2006 except in few cases;
(c) Did not pay Service Tax on Transportation/Freight & Insurance as the same is incidental to sale of equipment and also on the ground that transportation services rendered by any person other than GTA and courier agency was exempt from Service Tax.
Further Insurance service is not an independent service but incidental to main service of transportation.
Page 48 of 61Appeal No(s).: ST/75328 & 75329/2025-DB 13.1.1. For the sake of ready reference, relevant pages of the sample ST-3 Return filed, as submitted by the appellant, showing the Service Tax payments made in respect of 'Erection, commissioning and installation Service' and 'Works contract service' (by claiming abatement), are reproduced below: -
Page 49 of 61Appeal No(s).: ST/75328 & 75329/2025-DB Page 50 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB Page 51 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB Page 52 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB 13.2. We find that the above practice adopted by the appellant is legally correct. The contracts for Erection, Installation and Commissioning Service and for Commercial & Industrial Construction (Civil Work) are Works Contracts. Therefore, the valuation for the purpose of determination of taxable value of the service involved shall be only in relation to Erection, Installation and Commissioning Service and for Commercial & Industrial Construction (Civil Work) services. However, it is observed by us that the Ld. adjudicating authority has sought to enhance the two contracts to include the sale of equipment within its ambit for the purpose of deriving the taxable value. At this juncture, it is pertinent to note that the contracts for Supply of Equipments executed by the appellant with the customers is totally distinct and not related to the service contract. We observe that the transaction for supply of goods is totally distinct as separate invoices were also raised by the appellant as per the agreed price schedule in terms of the tender.
Those goods were handed over to the purchaser separately for consideration before their use under a distinct agreement. The transaction of Erection, Installation and Commissioning and Commercial Industrial Construction is a separate service contract in which even the goods already belonging to the owner could be used.
13.4. However, we find that the Ld. Adjudicating authority has considered the entire Turn Key project as a single contract only because of the cross-fall breach clause available in the contract. According to the Department, the responsibility of overall project lies with the appellant as there is a cross-fall breach clause in all contracts. The Ld. Adjudicating authority has concluded that though the contracts provided Page 53 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB separate price schedule for different jobs but it did not have any separate liability clause for each of such job according to the price schedule. Therefore, he has arrived at the conclusion that the activity undertaken by the Appellant is one integrated project.
13.5. We do not agree with the above said findings of the Ld. adjudicating authority in the impugned order. We observe that the issue is no longer res integra, as the same issue has been dealt with by the Hon'ble Karnataka High Court in the case of State of Karnataka Vs Transglobal Power Limited - [(2014) VIL. 348 (Kar.)] wherein the contracts between M/s. Karnataka Power Transmission Corporation Limited (Contractee) and M/s. Transglobal Power Limited (Contractor) were four in number as follows:
(a) technical specifications for laying of power stations;
(b) supply of materials and equipments;
(c) execution of civil works; and
(d) erection work- by labour.
13.6. In the contract for supply of materials, the description of goods, quantity, unit price, including taxes and duties, freight, insurance etc. were clearly set out. Before the execution of the erection portion of the contract, the contractor paid State levies thereon and then the said goods were supplied by the contractor and the title in the goods/materials passed to the contractee. The contractee became the owner of the said goods/materials. Thereafter in turn, the contractee handed over the said goods/materials, back to the contractor as the trustee for erection Page 54 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB work. For civil portion of the contract, the material such as cement, steel, etc. was used by the contractor to lay foundation for erecting transmission towers at certain specified distances. As regards erection portion of the contract, it was purely a labour contract.
There was a Cross-fall breach clause in the contract providing that the contractor is bound to perform the total contract in its entirety and non-performance of any part or portion of the contract shall be deemed to be a breach of the entire contract. In that case the Revenue contended that the work entrusted to the contractor was a "turnkey project" and therefore, a composite contract and that the transaction in question was to be treated as a Works Contract under Entry 23 of the Sixth Schedule of the Karnataka Value Added Tax Act, 2003. The High Court dismissed the appeal by the State of Karnataka and held as under:-
"The revisional authority relied upon para No. 3.5 of D. W. A. No. KPTCL /TZM/ TRL/DWA-103 dated January 6, 2005, which reads as under :
"It is expressly agreed to by the contractor that notwithstanding the fact that the contract is termed as civil contract, for convenience of operation and for payment of sales tax on supply portion, the other contracts namely erection is also integral part of the composite contract on the single source responsibility basis and the contractor is bound to perform the total contract in its entirety and non performance of any part or portion of the contract shall be deemed to be a breach of the entire contract.
In other words, it was treated as a "turnkey project". Because of this clause, the revisional authority was of the view that it is a composite contract and therefore he treated this contract as a works contract and levied tax under entry 23 of the Sixth Schedule. The Tribunal has set aside the said order.Page 55 of 61
Appeal No(s).: ST/75328 & 75329/2025-DB A careful reading of the aforesaid para 3.5 makes it clear for convenience of operation and for payment of sales tax on supply portion, it is treated as a contract for supply. Therefore, the intention of the parties is a manifest coupled with the said clause. The other terms and the conduct of the parties disclose in terms of the bid, the assessee supplied the materials as per specifications and paid tax thereon and transferred title in the goods to M/s. KPTCL. Thus, KPTCL became the owner of the said materials. They in turn, handed over the materials for safe custody to the assessee to enable him to perform the said contract i.e., erection work. As the KPTCL had entered into four contracts, unless these four contracts are performed in unison, the object of given contract would have been frustrated. All the four contracts are given to the same assessee. Therefore, they wanted to ensure that the erection work which is purely a labour work was also to be treated as an integral part of this composite contract on the single source responsibility basis and the contractor was bound to perform the total contract in its entirety and non-performance of any portion of the contract was to be treated as a breach of the entire contract, Intention is very clear. In order to see that the contractor does not wriggle out of the situation and the object of entering into the contract is not frustrated. The KPTCL., was insisting that it is a composite contract to be performed by the assessee in its entirety. Therefore, it is not a case where a contract which is entered into is not divisible as contract for supply of material and contract for labour. Even if it is a composite contract, if it is a divisible contract, then the levy of tax cannot be on the basis of works contract only. In cases of composite contract, which are not divisible, such contract should be treated as works contract and levy should be under Schedule VI of entry 23. In the instant case, as rightly pointed by the Tribunal, there are four contracts in nature. Each one of them is separate. In respect of the contract for sale of material taxes have been paid in accordance with law. No tax is payable in respect of contract for supply of labour. In civil works, it is a works contract and tax is levied under Schedule VI, entry 23. In those circumstances, we find that the finding recorded Page 56 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB by the Tribunal that it is a divisible contract and the order passed by the revisional authority was erroneous is proper. The Tribunal was justified in setting aside the order of revisional authority and restoring the order passed by the prescribed authority. Therefore, the substantial question of law is answered in favour of the assessee. We do not see any merit in these revision petitions. Accordingly, petitions are dismissed."
13.7. From the decision cited supra, we find that the Hon'ble High Court has held that the intention behind insertion of the cross-fall breach clause in the contracts was to see that the contractor did not wriggle out of the situation by non-performance of any portion of the contract, and that the object of entering into the contract was not frustrated. It was held that the levy of tax will be on the basis of the legal provisions of the contract and it cannot be determined on the basis of the cross-fall breach clause available in the contracts.
13.8. In this regard, we also find that the Ld. adjudicating authority observed the appellant's reliance on State of Karnataka v. Transglobal Power Ltd. [2014 VIL 348 (Kar)] to be misplaced for the reason that judgment was rendered under the Karnataka VAT Act and not under the Finance Act, 1994. It goes without saying that even though the said order cited supra has been delivered by the Hon'ble Karnataka High Court under the Karnataka VAT Act, the principle enshrined therein can be made applicable for similar issues under the Finance Act, 1994 also. Thus, we do not find any infirmity in the appellant citing the decision in support of their contentions. Accordingly, we hold that the ratio of this decision is equally applicable to the facts and circumstances of this case as well.
Page 57 of 61Appeal No(s).: ST/75328 & 75329/2025-DB 13.9. We also find that a similar issue has been decided by the Hon'ble Supreme Court in the case of Bharat Sanchar Nigam Ltd. [2006 (2) S.T.R. 161 (S.C.)] and the succeeding judgements. In the decision cited supra, the Hon'ble Apex Court observed that in the case of composite activity, the following two tests are to be sequentially applied to determine the applicable levy of tax :
(a)In the event, it is the intention of the parties to treat the composite contract as comprising of a separate sale contract and a separate service contract, and different rights are therefore ascribed to each such contract, the sale of goods would be chargeable to VAT/CST and the service portion would attract the levy of Service Tax;
(b)In the event that no such intention can be inferred, the true nature of the composite contract would have to be determined as per the dominant nature test.
13.10. We observe that in the instant case, the Department has failed to appreciate the above two separate tests laid down by the Hon'ble Apex Court. In line with the position laid down by the Hon'ble Supreme Court, it ought to have first been ascertained whether, on a consideration of the contracts and the concomitant aspects of the transactions, the intention of the parties was to treat the supply of Equipment as a sale activity or as part of provision of Works Contract Service. On the basis of the Terms of the contract executed by the appellant with the customers, we observe that it proves beyond doubt that the appellant always has the intention to treat the supply of Page 58 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB equipment as a separate contract for supply of equipments only. Therefore, we hold that the value of equipments sold under a distinct supply contract cannot be included in the value of Works Contract for levy of Service Tax.
13.11. We also observe that the issue involved in the present case is settled by the decision of the CESTAT at Allahabad in the case of Bharat Heavy Electricals Ltd. Vs. Commissioner, Central Excise Noida-II [2018 (12) TMI 378]. In the said case, the assessee was hired by M/s. Maharashtra State Electricity Transmission Company Ltd. under three (3) separate agreements. One contract was for supply of equipment of Transformers, Capacitors, Switches etc. Second contract was for executing civil work including design, engineering, manufacturing, etc., for the installation of the equipment as were agreed to be supplied by another contract. The third contract was for erection commissioning and installation of the said equipment. The Department has considered the entire activity of assessee arising out of three contracts as one single activity of work contract and the demand has been proposed and confirmed on the gross-value of total value of three of the contracts. The CESTAT held that property in goods under supply contract passes to the recipient prior to erection and construction work and hence value of equipment supplied under supply contract cannot be included in the value of taxable service. The CESTAT has held that the contract for execution of the Civil work is 'works contract' on its own merits and hence eligible for abatement on standalone basis. The CESTAT also held that the contract of Erection, Commissioning & Installation Services cannot be treated as works contract as goods required for the execution of the Page 59 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB same is provided to the appellants via a separate contract. Accordingly, the CESTAT, Allahabad held that the assessee has correctly discharged the tax liability and entire demand was held as unsustainable.
13.12. It may also be apt to refer to the decision rendered in the case of Commissioner of C.Ex. & S.T., Ahmedabad-III Vs Kalpataru Power Transmission Ltd. [2021 (48) G.S.T.L. 354 (Tri. - Ahmd.)] wherein a similar issue has been dealt by Tribunal at Ahmedabad. The relevant portion of the said decision is reproduced below:
"6.15 From the above decision it can be seen that the facts are identical and as much as the assessee in the said case entered into two supply contract and a contract for service which included supply of that material which is related to supply of service. The assessee has charged service tax on the service contract taking it as a Works Contract. Revenue raised the same contention that the value of both the contracts needs to be included in the value of service rendered. The Tribunal considering the same set of facts came to the conclusion that since the contracts were executed prior to 7-7-2009, hence the amended provision do not apply. Accordingly it was held that the value of material supplied under both the contracts cannot be included in the value of Works Contract Service.
6.16 In the present case also the similar facts are involved and the contracts were executed prior to 7- 7-2009. Therefore, even if revenue is of the contention that both the contract i.e. one for supply of goods and other for Works Contract Service are meant for one composite contract by virtue of unamended provision, the value of supply contract cannot be included in Works Contract Service."
13.13. Even though the above decision mainly deals with applicability of the amendment in Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 for the period prior to 07.07.2009, we find that the said decision also deals with includability of the value of goods supplied under a separate Page 60 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB contract for the purpose of determining the service tax liability in the Works Contract Service. We find the principle adopted in the said decision to be equally applicable to the facts and circumstances of the present case also.
14. We find that the ratios of the decisions cited supra are squarely applicable to the facts of the present case. We are of the view that the facts involved in the present case are on much better footing as, in the present case, the appellant-company has discharged service tax on full value of the Erection, Installation and Commissioning contract. Thus, by relying on the decisions cited supra, we hold that the demand of service tax, along with interest, confirmed in the impugned order are not sustainable and hence we set aside the same.
14.1. As the demand of service tax against the appellants does not survive, the question of imposing penalties under Section 78 of the Finance Act, 1994 does not arise and hence, we set aside the same. As the appellant has been filing their returns regularly, we find the penalty imposed under Section 77 to be unsustainable and hence, we set aside the same.
15.. We have also examined the appellant's contentions against the demands confirmed in the impugned order on the ground of limitation. To this extent, the appellant has pointed out that the impugned Show Cause Notice was issued on 11.08.2017 covering the period from 01.04.2012 to 30.09.2016 by invoking the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994. We take note of the fact that the proviso to Section 73(1) can be invoked only in situations where any Service Tax has not been levied Page 61 of 61 Appeal No(s).: ST/75328 & 75329/2025-DB or paid or has been short levied or short paid or erroneously refunded by reasons of fraud, collusion, wilful misstatement, suppression of facts or contravention of any of the provisions of the Act or of the rules made thereunder with an intention to evade payment of Service Tax. In the present case, we find that none of the above ingredients required for invoking extended period has been established. Thus, we hold that the demand confirmed in the impugned order by invoking the extended period of limitation, is liable to be set aside on the ground of time bar.
16. Further, we find that a penalty of Rs.1,00,000/- has been imposed on Mr. P.P. Gupta, Managing Director of the appellant-company, the co-appellant herein, under Section 78A of the Finance Act, 1994. In view of the findings in the preceding paragraphs of this Order, we do not find any reason to sustain the allegations levelled against him. Hence, we hold that the penalty imposed on him is unjustified and accordingly, the same stands set aside.
17. In view of the above findings, we set aside the impugned order qua the demands confirmed against the appellants herein, along with interest and penalties, and allow the appeals, with consequential relief, if any, as per law.
(Order pronounced in the open court on 28.10.2025) Sd/-
(R. MURALIDHAR) MEMBER (JUDICIAL) Sd/-
(K. ANPAZHAKAN) MEMBER (TECHNICAL) Sdd