No Vivisection in Service and Material Components of Contract make a Composite Works Contract: CESTAT [Read Order]

Orissa - sales tax - contractor company - Works Contract -Taxscan

The Hyderabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) in the case of Vishwanath Projects Ltd v Commissioner of ST held that where a contract cannot be vivisection between service component and material component, the contract in question is a composite works contract.

The appellant is engaged in the provision of Works Contract Service, Goods Transport Agency and Erection and Commissioning Services. It was found that the appellant had not discharged its service tax liability on unexecuted works and advances received from its customers.

Appellant submits that:

  1. For Erection, Commissioning or Installation service, the construction of floodlighting along the Indo-Bangladesh Border in the State of Tripura was given to them by M/s C which was given to M/s C from the Ministry of Home Affairs. The said arrangement would fall within the meaning of Works Contract Service which is not chargeable to tax.
  2. That the floodlighting is essentially linked to transmission and distribution of electricity which is also exempt from the levy of service tax.
  3. For the demand of service tax on freight charges is concerned, the appellant submits that the demand was made based on the amount indicated in their own books of accounts as they have been paid towards goods transport services on a reverse charge basis.

The Coram constituting of S.K. Mohanty as Judicial member and P.V. Subba Rao as Technical member held that

  1. Since the contract between M/s C on behalf of the Ministry and Appellant cannot have vivisection between the service component and the material component, the contract in question is a composite works contract involving both rendition of service and deemed sale/sale of materials used in rendering such services
  2. With respect to the second contention of the appellant, it is held that merely because the purpose of a contract is providing floodlighting, it is not a project for transmission and distribution of electricity. The Court elaborated that the application of such logic was misplaced for the reason that there could hardly be any service that is rendered by any service provider without the use of electricity in some form and for this purpose being connected to the power grid.
  3. In lack of any alternative evidence on the part of the department in support of its contention, the Tribunal relied upon the record provided by the appellant.
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