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Contract for Basic Engineering, Design and Others

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Service Tax - Contract for basic engineering, design, manufacture and supply of critical/ proprietary equipment, advisory services for erection and commissioning including establishing of process guarantee and training - Demand for service tax with interest and penalties on the ground that the agreements entered into with the foreign suppliers for equipment includes service portion also and therefore the contract has to be treated as one of a contract entered into between the parties for execution of works contract for the appellants – HELD - The submissions made before us that the entire value has been declared in the Bill of Entry has not been clearly made with the supporting evidences/documents before the learned Commissioner and this has resulted in a wrong conclusion. Moreover the agreements also in our opinion are required to be gone into in greater detail than what has been done. From the contract it becomes quite clear that the equipment suppliers did not undertake or were required to take erection, commissioning and installation of the equipments supplied by them. Prima facie from the Contract it appears that the erection, commissioning and installation work is not to be undertaken by the foreign suppliers. The very fact that appellants have made 90% of the payment due to the foreign suppliers would also support the case of the appellant that there is no component of erection, commissioning or installation service in the payment since the erection, commissioning and installation has not at all started leave alone getting completed. If erection, commissioning or installation service was part of the supply contract, the amount attributable to such service need not have been paid by the appellant - Matter requires fresh consideration by the learned Commissioner - Pre-deposit waived and impugned order set aside – Matter remanded

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Guest Tuesday, 17 September 2019

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