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Consult Construction

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2014-VIL-293-AP

M/s MARK INFRASTRUCTURE PVT LTD Vs THE COMMERCIAL TAX OFFICER

Works Contract – Composition scheme – Assessment order assessing the petitioner to tax under section 4(7)(b) or (c) of the act, and not under section 4(7)(d) or (a) thereof, illegal and void ab-initio – HELD - Clause (8) of the agreement stipulates that the contract value is inclusive of all taxes; and any liability, on account of Sales Tax, VAT etc., shall be to the account of the petitioner. Having accepted liability to pay VAT, the petitioner cannot now turn around and contend that the liability to pay VAT is on contractee, and they are not liable to pay tax under the Act. No material has been placed on record to show that contractee had collected tax at 1.25% from independent purchasers, and had remitted the same to the State exchequer. On the other hand tax at 1.25% was deducted from the petitioners bills by SRMT and paid to the department. The petitioner has not even chosen to array contractee as a respondent in the Writ Petition. It is clear that SRMT is the contractee, and the petitioner is the contractor and not the sub-contractor - The petitioners contention that, even if they are not entitled for exemption under Section 4(7)(d) and its proviso, they are liable to be subject to tax under Section 4(7)(a) of the Act, and not under Section 4(7)(b)&(c) of the Act, is also not tenable. Having submitted an application for composition in Form VAT 250, the petitioner cannot now be heard to contend that they should have been assessed to tax under Section 4(7)(a) of the Act, as Section 4(7)(a) of the Act is applicable only to a dealer who has not exercised the option of composition under Section 4(7)(b) to (d) of the Act – Writ petition - Abuse of process of court - Not only has the petitioner suppressed relevant and material facts, but has also sought to mislead this Court misrepresenting facts. We see no reason, therefore, to exercise discretion, under Article 226 of the Constitution of India, to interfere - Both on merits and for abuse of process of Court, the Writ Petition is liable to be, and is accordingly, dismissed - Assessee petition dismissed with exemplary cost

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43
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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31
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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14
TS-406-SC-2014-VAT

SC dismisses assessee’s appeal, upholds Rajasthan HC judgment confirming supply of explosives to contractor for use in mining operations as transaction of ‘sale' u/s Sec 2(38)(ii) of Rajasthan Sales Tax Act, 1994 (Act); It rejected assessee’s contention that explosives were consumable items and as per Apex Court ruling in Ganon Dunkerley, cost of consumables in which property was not transferred was deductible from value of works contract; Ultimate use of goods irrelevant, transaction of sale stood concluded with passing of goods for consideration in the hands of contractors; Further, HC held that even if transfer of property in goods was not permitted by statutory provision viz. Explosive Act, it would constitute taxable transaction under the Act; Moreover, HC denied the benefit of concessional tax rate @ 4% u/s 10 of the Act, observing that assessee itself did not use the goods as raw materials and sale took place prior to use in mining operation : SC
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48

Posted by on in Service Tax

2014-VIL-183-CESTAT-MUM-ST - SCHINDLER (I) PVT LTD Vs COMMISSIONER OF SERVICE TAX, MUMBAI-II

Service Tax - Works contract services - Valuation - Composition scheme - Applicability of Rule 2A of the Service Tax (Determination of Value) Rules, 2006 - Showcause Notice demanding service tax on the ground that the applicants are paying VAT as well as Service Tax on notional value, therefore, the applicants are liable to discharge service tax liability on the contracts under the composite scheme – HELD - In the contracts there was a specific mention as to the value of the goods supplied. We find that before the adjudicating authority the applicants produced the actual data regarding the value of goods transferred in execution of the contract and the VAT paid in respect of all the contracts - The actual value of property of goods transferred in execution of the contract is the value adopted for purposes of payment of VAT and shall be taken as value of property in goods transferred in execution of the said work contracts for determination of value of service portion in the execution of the contract. In the present case, data in respect of actual value of property in goods transferred in execution of the work is available and produced before the adjudicating authority and the same has not been taken into consideration while confirming the demand – Matter requires reconsideration – Matter remanded – Assessee appeal allowed

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30
GOVERNMENT OF TAMIL NADU

Press Release No. 453
2nd September 2014
Works Contractors (TNVAT) - Tax Deduction at Source
Remittance to Commercial Taxes Department

As per the provisions of Section 13 of TNVAT Act, 2006, every person entrusting works contracts to contractors should deduct tax at the rate of 2% on civil works or civil maintenance works and at the rate of 5% on all works other than civil works at the time of making payments and remit the tax deducted at source on or before 20th of every succeeding month in the Commercial Tax Offices. Civil or other construction works in Tamil Nadu entrusted by any individual, firm, developer, builder, etc., to any sub-contractor will fall under the ambit of civil works contact. Works "other than civil works" mean contracts such as interior works, annual maintenance contracts, electrical works contracts, machine repairs, house-keeping contractors etc., with a value above one lakh rupees.

Besides individuals, Central and State Government Departments, Public Sector Undertakings, Local Bodies, Companies, Societies, Proprietorship and Partnership firms should deduct tax at the rate of 2% on civil works and at the rate of 5% on all works other than civil works and remit the tax deducted at source in the respective circles. If any person or agency awarding such works contract is not liable to be registered under TNVAT Act, they shall remit tax deducted at source (TDS) from payments to their contractors in the Commercial Tax circle within which they reside or function. In case of Chennai, TDS payments can be made at TDS circle at Greams Road Commercial Taxes Office (ph: 044-28293476)

Persons or organizations who contravene the provisions and fail to deduct and remit the tax, shall pay in addition to the amount required to be deducted and deposited, interest at 2% per month on such TDS payable for the entire period of default

Details of legal provisions of TDS on works contracts are available in the website www.tnvat.gov.in. Any further queries can be clarified through e-mail id This email address is being protected from spambots. You need JavaScript enabled to view it. or through call centre in phone nos. 044-28290962 or 1802425-1959.

All persons or organizations awarding such works contracts are requested to cooperate by ensure prompt payment of taxes to enable Government of Tamil Nadu implement public and social welfare schemes successfully.

K. Rajaraman,
For Principal Secretary/
Commissioner of Commercial Taxes
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35

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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37
CESTAT allows excise duty exemption under Notification No. 6/2006-CE on supply of goods to contractors undertaking setting-up of Ultra Mega Power Projects under International Competitive Bidding (ICB) process; Rejects Revenue contention that exemption benefit unavailable since assessee a sub-contractor, not party to ICB process, and goods supplied not entitled to customs duty exemption under Notification No. 21/2002-Cus; Notification No. 6/2006 nowhere stipulates that sub-contractors must participate in bidding process, mere mention of their name in awarded contract and certification from Chief Electrical Engineer and undertaking of Chief Executive Officer of project sufficient to avail benefit; Moreover, goods supplied by assessee exempt from customs duty in terms of Sl. No. 400 of Notification No. 21/2002-Cus as well as certification from Joint Secretary, Ministry of Power, as stipulated thereunder; However, since relevant Certificates not produced before Adjudicating Authority, Tribunal remands matter for de novo consideration : Mumbai Tribunal
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42

Posted by on in VAT

GOVERNMENT OF TAMILNADU

OFFICE OF THE PRINCIPAL SECRETARY/ COMMISSIONER OF COMMERCIAL TAXES

Act Cell-III/32692/2013

Chennai: 30.05.2014
Circular No.25 /2014

Sub: TNVAT Act, 2006 - Zero rate sale - Eligibility criteria -Revised instructions issued – Regarding.
Ref: The Commissioner of Commercial Taxes, Chennai-5 Circular No.9/2013, dated 24.07.2013

In continuation of the Circular cited, it is further clarified that the works contract executed for a Developer or Co-developer of a SEZ for its authorized operations is exempted from levy of sales tax as per G.O.Ms.No.193, CT & R (B2) dated 30.12.2006 read with Section 88 (3) (i) of the TNVAT Act, 2006.

K. Rajaraman
Principal Secretary
Commissioner of Commercial Taxes

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30
S.O.110.- No.F. 12(59)FD/Tax/2014-83

In exercise of the powers conferred by sub-section (3) of section 8 of the Rajasthan Value Added Tax Act, 2003 (Act No.4 of 2003), the State Government being of the opinion that it is expedient in public interest so to do, hereby exempts from tax payable, by the registered dealers commonly known as developers/ builders who, as works contractors, undertake the construction of flats, dwellings or buildings or premises and transfer them along with goods (whether as goods or in some other form) and land or interest underlying the land in pursuance of an agreement, on the amount of consideration received up to 31.03.2014 with regard to the agreement made by them for construction of flats, dwellings or buildings or other premises.
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