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Service Tax Case Law - Service Tax applicable on erection Contract.

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Jindal Water Infrastructure Ltd.

CESTAT allows assessee’s ‘rectification of mistake’ (ROM) application, finds clubbing of contracts between parties involving separate supply of material and erection work unsustainable absent interlinking of both; Observes, under supply contract, assessee purchased goods from other manufactures/suppliers of goods and resold goods to principal, in the course of transit as specified u/s 3(b) of Central Sales Tax Act,1956 (CST Act)and under erection contract, assessee used and added cost of material being cement and steel.

Consequently, finds error in final CESTAT's order whereby it has been considered that supply & transfer to the principal is by way of accretion under erection contract, notes that, while doing erection work, ownershipof items or materials being pipe, etc, was already with the principal and assessee could not have again transferred material, supplied under supply contract, by way of work contract or service contract; Further, holds that Notification No. 23/2009-ST dated July 7, 2009, providing that the gross amount under “works contract” shall include a value of all goods used in execution of works contract is applicable prospectively, and not applicable where execution commenced and/or payment is received on or before said date.

Holds assessee liable to Service Tax only on erection contract under the normal (and not composition) scheme and allows assessee’s appeal while directing him to file fresh computation of tax payable and pay tax (if any) or claim refund.

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