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Consult Construction

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Haryana Value Added Tax Act, 2003 - Whether the Tribunal is justified in upholding the levy of tax on chemicals used as consumables in the process of job work of dyeing of fabric by assuming that property in the goods has passed on to the principals and ignoring the quantity of dyes, which were not transferred to the principals 

HELD - the chemicals used in the job work are taxable, however, the pertinent question to be answered would be as to how much of dyes/colours are taxable which is transferred to the fabric when the whole quantity of consumable is not transferred - while determining the actual loss of chemicals, dyes and colours where the fabric or textile undergoes various processes depends upon factual aspect which can be considered only by the Assessing Officer - what is taxable under the HVAT and CST Acts is the value of the goods which get transferred to the customer in the execution of works contract either as goods or in any other form and not the value of goods used or consumed in the execution of works contract if such user or consumption does not result in transfer of property in those goods in any form to the customer.

The tax on the entire value of chemicals consumed during the process of dyeing and job work are not to be included for the purpose of levy of VAT as substantial portion of the same is not transferred to the principal eventually - the impugned orders passed by the Tribunal in all the three appeals are set aside and the matter is remanded to the Assessing Officer to decide the matter afresh

 

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CGST : The applicant-company is engaged in the manufacturing, installation and other ancillary services of integrated transmission towers. It has executed a contract with PGCIL for construction and commissioning of Tower Package. It submits that as the contract with PGCIL has been split up into two separate parts one for ex-factory supply of materials and the other for supply of allied services like erection of towers, testing and commissioning of transmission lines etc.

which also includes inland/local transportation, insurance, delivery of materials and storage of them at the contractee PGCIL's site, the execution of the Towers cannot come under "works contract service", since it does not involve the supply of any immovable property and has sought a Ruling on the applicability of Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017

The AAR held that GST being a tax on the supply of both goods and services, it is no longer necessary to segregate the supply of goods in an indivisible composite contract for the purpose of taxation. GST can be levied on the entire value chain, which is the bundled supply of goods and services for execution of an indivisible composite contract for construction, erection, commissioning etc. of an immovable property.

The applicant is executing an indivisible composite contract for construction, erection and commissioning of an immovable property, namely, the Tower Package, execution of which involves bundled supply of both goods and services and it is, therefore, works contract. The contract for the Tower Package being works contract is service in terms of paragraph 6(a) to Schedule II to the GST Act. Activities covered under Schedule II are to be treated as a supply of the nature described under section 7(1)(d) of the GST Act.

Thus, GST is to be paid on the entire value of the works contract, including the supply of materials, transportation, in transit insurance, erection, commissioning etc. The exemption under serial no. 18 of Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017 is, therefore, not applicable in the present context.

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Section 16 of the Central Goods and Services Tax Act, 2017/Section 19, read with section 3, of the Tamil Nadu Value Added Tax Act, 2006 - Input tax credit - Eligibility and conditions for taking credit - Assessment year 2007-08 - Whether section19(11) violates articles 14 and 19(1)(g) of Constitution of India 

Held, no -Whethersection 19(11) is inconsistent to section 3(3) of Tamil Nadu VAT Act - Held, no -Whether time period as provided in section 19(11) is mandatory 

Held, yes -Whether Assessing Authorities could have extended period for claiming input tax
credit beyond period as provided in section 19(11) - Held, no [Paras 37, 42 and 46]
[In favour of revenue] (OR)

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Central Sales Tax Act, 1956 – Works Contract - Whether the supply of the goods from Mumbai to Delhi to execute the works contract constitute inter-state sales - Tribunal view that the goods were appropriated to the contract, which was concluded in Mumbai, upon acceptance of the orders – Revenue view that sale of the right to use the elevators was concluded in Delhi, which was also the place of performance of the contract 

HELD - the appreciation of the law by the Tribunal in this case is sound and unexceptionable. The placement of an order by the agent for procurement of the lifts in this case was merely an offer. It is only upon its acceptance and further steps taken by the supplier that an offer crystallizes into a binding promise or contract. That took place in Mumbai. It is now too far well settled that the incidence of Central Sales Tax or even sale of goods, occurs where the goods are appropriated to the contract.

In this case, the specifications and the invoices issued in pursuance to the contract are sufficient to hold that the goods that moved from outside Delhi for execution of the works contract are inter-state sale and as such cannot be taxed under the Delhi Sales Tax – the Tribunal order is upheld and Revenue appeal is dismissed

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Service Tax – Valuation – meaning of term ‘consideration’ - Whether the value of construction material as provided free by the service recipient to the service provider-appellant, for the purpose of providing services under the category of commercial or industrial construction services is required to be added in the value of the services – benefit of Notifications No.15/2004-ST dated 10.09.2004 

HELD - the valuation of the taxable service is the value received by the service provider as “consideration’ from the service recipient for the service provider whether monetary or otherwise. However, it should have flown from service recipient to service provider in the manner that it should accrue as the benefit of the service provider - the construction material provided by the service recipient to the service provider-appellant for construction of Chimney and chimney elevator package though has to be incorporated into the construction at the time when service provider is providing the construction services to the recipient. But the fact remains is that such material provided by the service recipient is to be used for service recipient only.

Hence no benefit has accrued to the service provider due to the said free construction material. Therefore, the said construction material would not constitute a non-monetary consideration - the gross amount charged shall include the construction material if and only if some value is charged for the same.

Hence, the construction material supplied by the service recipient free of cost, the amount thereof is not the gross amount taxable value as not being charged. However, for the construction material as used by the appellant, is liable to take the benefit of Notification No.15/2004-ST - extended period of limitation couldn’t be invoked against the assessee - the impugned SCN as being barred by time and set aside – assessee appeal stands allowed

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Rajasthan AAR holds the transaction between Del Crede Agent (DCA/ Applicant) and the customer for passing on specified bonus is nothing but additional discount for making early payment by the customer and is not in the nature of a ‘supply’ in accordance with GST Act, 2017.

Notes that the specified bonus relates to DCA passing on bonus to the customer as per rate allowed by the principal when DCA makes immediate payment to principal against supplies and customer also makes payment within prescribed 10 day period; Observing that the discount offered towards early payment is not a new supply but part of the original supply between principal & customer.

AAR opines that “additional discount relates to supply already made by the principal and passing on such bonus to the customers by DCA is in the nature of pure agent”; AAR further states that since the said transaction is not supply by the customer (being the recipient of goods/ services), invoice cannot be raised/issued by the customer and if any amount passes on to the DCA in any manner, the DCA is not entitled to take ITC of the said amount passed on by the customer: Rajasthan AAR

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M/s HINDUSTAN SHIPYARD LTD Vs COMMISSIONER OF CENTRAL EXCISE, CUSTOMS & SERVICE TAX, VISAKHAPATNAM-I

 

Service Tax - mobilization advance from customer - Revenue that the amount received by the
appellant from Indian Navy for building facilities are in the nature of advance payments for
taxable services to be provided and liable to service tax – appellant stand that the amount is in the nature of a grant and to be amortized against future payments. Thus, it is the in the form of mobilization advance and not linked to any service provided or to be provided 

HELD - As far as the amounts received by the appellant from the Indian Navy for the purpose of upgrading their facilities are concerned, they are not linked to the present contract and hence can only be termed mobilization advances not linked to any signed contract for rendering services. Of course, in future Indian Navy may award the appellant contracts and the amounts now paid will be adjusted against such contracts. At this stage it is not clear as to what contracts will be signed and whether they will be liable to service tax during that period.
Therefore, there is no ground to charge service tax on the mobilization advance received by the appellant - no service tax is payable on the amount received towards mobilization advance of the contract from the Indian Navy. As far as the amounts received towards reimbursement of income tax and VAT paid including the TDS paid by the appellant and reimbursed by the Indian Navy are concerned, these are in the nature of reimbursable expenses and hence cannot be included in the value of taxable services. 

As far as the amounts received towards Repair Technical Documents (RTDs) are concerned, these are goods received by the appellant on behalf of Indian Navy and were imported by filing a bill of entry and no service tax can be levied on the goods - The impugned order is set aside and the appeal is allowed

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M/s ALEMBIC LTD & SHRENO LTD Vs C.C.E. & S.T. VADODARA-I: 23.10.2018 - Service Tax - the Appellants had availed Cenvat Credit in the course of constructing the real estate projects - whether the Appellants are required to reverse any portion of the Cenvat Credit, after receipt of Completion Certificate for the projects as they will not be discharging Service Tax liability on properties sold thereafter, where no advance was received prior to receipt of Completion Certificate - Whether receipt of consideration for residential units sold as immovable property after receipt of completion certificate amounts to providing exempted service and whether the Appellants are liable to pay 8%/10% amount of exempted value under Rule 6 of the CCR, 04 

HELD - having taken only proportionate Credit on input services after receipt of Completion certificate, duly backed by CA certificate and certified work sheets for the proportionate credits availed after Completion Certificate and also demonstrated on sample basis during the course of hearing, the Appellants have fulfilled its obligation under Rule 3 of the CCR, 04 r/w Rule 6 thereof and as such, they are not liable to pay any amount equal to 8%/10% of the “sale price of immovable property” after receipt of completion certificate under Rule 6 of the CCR, 2004 - entitlement to credit has to be examined only at the time of receipt of input service and once it is found to be availed at a time when output service is wholly taxable, and the said credit is availed legitimately, the same cannot be denied and/or recovered unless specific machinery provisions are made in this regard 

even if one assumed sale of immovable property after Completion Certificate to be “exempt service”, even then there is no legal requirement to reverse any credit availed on “input services” in the past (prior to obtaining Completion Certificate) - the availment of cenvat credit by the appellant is absolutely legal and correct in accordance with Rule 4(7) of CCR, 2004. At the time of taking credit, there is no existence of any exempted service, therefore, there is no application of Rule 6 - the appellant have either not availed the cenvat credit in respect of the services received after obtaining the completion certificate in respect of exempted service or availed proportionate credit attributed to the taxable output service. For this reason also Rule 6 has no application for the period after obtaining the completion Certificate -

The Appellants can be said to have “maintained proper separate accounts” as required under Rule 6 of the CCR, 2004, having availed credit only to the extent input services in taxable activity, on the scientific basis after obtaining Completion Certificate - the Appellants are eligible to seek refund of the amount paid under protest towards Credit availed from 2010 till receipt of completion certificate, based on CERA audit objection - The assessee appeals are allowed.

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Kerala AAR holds that it is lawful to structure development agreement by fixing the land cost after absorbing the development charges for sale of developed plots/ land with civil structures after the issuance of Completion Certificate,

however, ITC is ineligible on such plots sold after completion; Clarifies that said transaction squarely is covered by Para 5 of Schedule III of the CGST Act which provides that sale of land and sale of  building (subject to clause (b) of para 5 of Schedule II) shall be treated neither as a supply of goods nor supply of service; Refers to Para 5(b) of Schedule II which states that construction of a complex, building, civil structure, including a complex or building intended for sale to a buyer, wholly or partly, except where entire consideration has been received after issuance of completion certificate, shall be treated as ‘supply of services’; Observing that transaction in instant case is in respect of sale of developed plots/land with civil structures, after issuance of Completion Certificate,

holds that same is covered by Para 5 of Schedule III; Accordingly, stating that sale deed executed for plot as well as undivided share in common area attracts only stamp duty and registration, holds that Input Tax Credit (ITC) availed in respect of GST paid on goods and/or services used/consumed for development of land is liable to be reversed on pro-rata basis in respect of plots sold after the issuance of completion certificate : Kerala AAR 

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Kerala AAR holds that small business exemption provided under Section 22 of CGST Act, is available to co-owners separately in case of jointly owned property, where the rent is collected together but divided equally and transferred to the respective co-owner's bank account; Clarifies that engaging a co-owner to collect and distribute rent among all the owners for administrative convenience has no implication on the given business exemption for individual co-owners;

Notes that while total rent from properties rented out by co-owners exceed Rs. 20 lakh rupees in a financial year, individual share is not exceeding the said threshold; States that “by mere joining of hands of two or more persons, a different and distinct legal entity or legal personality does not come into existence, unless there is an intention to do so”, while expounding that “Co-ownership of the property is for financial, administrative and family reasons”

Finds that, it is a settled law under Section 26 of Income Tax Act that, such persons shall not be assessed as an association of persons, but the share of each such person in the income from property is included in his total income; , Further, elucidates that there are judicial pronouncement under service tax as well which states that clubbing of rent amount received by each co-owneras per their share in jointly owned rented property, is not permissible : Kerala AAR 

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