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CESTAT : Separate contracts for goods supply & erection / commissioning taxable as composite works contract

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TS-410-Tribunal-2014-ST

CESTAT upholds service tax on reverse charge basis on turnkey project awarded to entity in China for setting up of power plant in India, under ‘works contract’ category; Though project split into two contracts, one for supply of equipment by Chinese entity and another for erection & commissioning by entity’s Indian representative, it must be considered as one single composite contract; Definition of ‘Works contract’ in Explanation to Sec 65(105)(zzzza) of Finance Act covers turnkey projects including engineering, procurement and construction or commissioning (EPC) projects; Relies on SC ruling in Ishikawajma-Harima Heavy Indus. Ltd., terms & conditions must be read together and contract must be construed in light of intention of parties; However, Revenue cannot enforce composition scheme for service tax payment, value of goods determinable in view of customs duty payment on import clearance, thus, normal tax rate applicable on service portion  : Mumbai Tribunal
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Guest Wednesday, 16 August 2017

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