When activities can be identified individually, they should not be held as “composite contract”.

PJ-Case law-2012/13-1559

Case:-BHARAT HEAVY ELECTRICAL LTD.VersusCOMMISSIONER OF S.T., CHENNAI

Citation:-2013 (30) S.T.R. 269 (Tri. – Chennai).

Brief facts:-By the impugned orders, demand for service tax, interest and penalties have been confirmed against the applicants under the category of "Erection, Commissioning and Installation Services" for setting up of power plant by the applicants. The facts of the case are that during the impugned period, the applicants are engaged in the activity of setting up of power plant.The main subject matter of this appeal is to separate disclosure of the activities more than one in the contract to avail the benefit of the Cenvat credit of the related inputs/ Capital goods.

Appellant’s Contention:-It is the contention of the applicants that they are involved in the activity of "Construction of Civil Work" as well as "Erection, Commissioning and Installation Services" for setting up of the power plant. The work has been done by them under contracts under which separate activities and payments for each activity are specified. In the said agreement, the works relating to ‘Civil Work’ and ‘Commissioning and Installation’ are shown separately. The applicants are mainly involved in the activity of 'Commissioning and Installation', therefore, they outsourced the 'Civil Work' on which they did not take any Cenvat credit of input services or capital goods and the sub-contractor has paid the service tax on that activity. It is further contended that for the activity of 'Commissioning and Installation', they took the Cenvat credit and discharged their service tax liability accordingly without claiming the benefit of Exemption Notification Nos. 15/2004 or 19/2005 or 1/2006.

Respondent’s Contention:-The Respondent submitted that as it is a "composite contract", for the act of "Erection, Commissioning and Installation" of a power plant, the applicants have availed the Cenvat credit of input service/capital goods, therefore, the applicants are not entitled for the benefit of Exemption Notification Nos. 15/2004 or 19/2005 or 1/2006 and they are liable to pay duty on the gross amount of services provided by them.It is also the contention of the Revenue that the activity undertaken by the applicants are more appropriately classifiable under "Erection, Commissioning and Installation Services".

Reasoning Of Judgment:-After Hearing both sides, examining the records and considering their submissions, we find that all the activities undertaken by the applicants can be identified separately. Therefore, following the decision in the case of Commissioner of Central Excise, Raipur v. BSBK Pvt. Ltd. reported in 2010 (18) S.T.R. 555 (Tn. - LB) = 2010 (253) E.L.T. 522 (Tri.-LB),wherein this Tribunal has held that when the activities undertaken by the applicants are identifiable separately, then, the whole of the activity cannot be termed as "composite contract". In the instant case also, the activities undertaken by the appellants can be identified separately, therefore, following the decision in the case of BSBK Pvt. Ltd.(supra), we find that the applicants have made out a prima facie case for 100% waiver of service tax, interest and penalty. Accordingly, we waive the requirement of pre-deposit of the entire amount of service tax, interest and penalty and stay recovery thereof during the pendency of the appeal.

Decision:-Stay granted.

Comment:-The essence of this case is that when the services can be identified individually, treatinthem as “composite contract” and levying service tax on the same is not justifiable.
d by the appellant herein, raising separate bills for cargo handling service and transportation. In Tribunal’s view, the appellant has made out a prima casefor waiver of pre-deposit of the amounts on limitation at this juncture. Accordingly, the application for waiverof pre-deposit of amounts involved is allowed and recovery thereof stayed till the disposal of appeal.

Decision:- Stay Application allowed

Comment:-The essence of this case is that when the act of the assessee is based on the clarification given by the Board, prima facie, assessee cannot be found at fault. Accordingly, bifurcation of transportation charges and excluding the same from the cargo handling services cannot be held as improper and so complete waiver from the condition of complying with the amount of pre-deposit was granted.

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PJ-Case law-2012/13-1559

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