The Kolkata bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that ‘Erection, Commissioning and Installation Services’ only cover service contracts and set-asides demand for the value of goods/material supplied under supply work orders.
The appellant, M/s Gillander Arbuthnot, and Co. Ltdawarded separate work orders for “sale/supply of goods” and provision of “Erection, Commissioning and Installation Services” thereof by M/s. Tata Steel Limited (TSL). The commissioner confirmed the demand made for short payment of service tax under the taxable category “Erection, Commissioning and Installation Services” on the purported ground of non-inclusion of the value of goods/material supplied under the supply work orders in valuing the said taxable service.
The counsel for the appellant submitted that the work order for “supply/sale of goods” and provision of “Erection, Commissioning and Installation Services” respectively, are separate and distinct contracts. The higher/lower profit margin arising from a contract for the sale of goods cannot per se be a ground for rejecting the valuation of services, which has to be ascertained strictly in terms of Section 67 of the Finance Act.
The counsel by relying on the decision of the Supreme Court in the L&T case further submitted that even if the supply of goods and services are to be construed as an indivisible EPC contract,EPC Contract could only be taxed under the taxable category “Works Contract Services” introduced with effect from 1 June 2007 and that the pre-existing category “Erection, Commissioning and Installation Services” could only cover service contracts simpliciter.
The Coram of Mr. P. K. Choudhary, Judicial Member Mr. P. Anjani Kumar, Technical Member relying on the Supreme Court decision in the L&T case, observed that composite contracts involving the supply of both goods and services could not have been taxed under the category, “Erection, Commissioning and Installation Services”.
Further, the Tribunal observed that the levy of tax on the sale/supply of goods and provision of services are mutually exclusive, the value of goods cannot be subjected to service tax, and neither can the value of services be charged to VAT,
Mr. Arvind Behati and Mr. A. Roy appeared on behalf of the appellant and respondent.
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