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Determination of Value under ST Rules, 2006 – Rule 2A - Works Contract

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2014-VIL-168-CESTAT-MUM-ST

GUPTA ENERGY PVT LTD Vs COMMISSIONER OF CUSTOMS & CENTRAL EXCISE

Service Tax (Determination of Value) Rules, 2006 – Rule 2A - Works Contract - Split of Turnkey project - Appellant splitting contract into two, one with the main party, namely, China National Automotive Industry International Corporation for supply of equipment and another with the authorized person in India for erection and commissioning – Intention of parties

HELD – The two contracts have to be read together and the two contracts when read together are for the turnkey projects including EPC projects. In our view, the fact that the total project or initial Letter of intent has been split up into two contracts one with CNAICO and other with SOKEO who is the authorized representative of CNAICO and has been doing everything on behalf of CNAICO has to be considered as one single composite contract and this contract would come within the scope of works contract service, viz. turnkey project. We accordingly hold that the services provided by CNAICO is works contract service and therefore the appellants are liable to pay service tax on reverse charge basis - Rule that clause (i) of sub-rule (1) provides that value of works contract service determined shall be equivalent to the gross amount charged for the works contract less the value of transfer of property in goods involved in the execution of the said works contract - Goods supplied by CNAICO have been cleared on payment of Customs duty after determining the value of such goods and therefore it should be possible to determine the value of transfer of property in goods involved in the execution of the said works contract and thereafter value of the service portion. The normal rate of service tax would be applicable on the value of service so determined - Penalty under Sections 77 and 78 of the Finance Act, 1994 is not imposable. Due to the fact that the appellants cannot be compelled to opt for the Composition Scheme and the value has to be determined as per Rule 2A of the Service Tax (Determination of Value) Rules, 2006, the matter will require re-examination by the original authority and the question of penalty under Sections 77 and 78 can be re-determined thereafter only. In our view, if appellants' contention that they have paid to CNAICO only for the supply of goods is true then the value for service portion will become nil and therefore it would have implication on penalty imposable - Matter remanded back – Assessee appeal allowed

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