A works contract can be vivisected prior to 01/06/2007 and be subjected to levy of service tax under “erection, installation and commissioning service”. Also, longer period of limitation invokable

A   works   contract   can   be   vivisected   prior to   01/06/2007  and   be   subjected   to   levy   of service tax under  “erection, installation and commissioning   service”.  Also,   longer  period of limitation  invokable.

FACTS:

The  Appellant   had  entered  into  six  lumpsum  turnkey  contracts  prior  to  01/06/2007  each  having  three  parts and a consideration  for each of the parts viz. designing, procurement of various capital goods and thereafter installation   of   such   goods   was   ascertainable.    They were  discharging   service  tax  in  respect  of  designing under   "consulting   engineer   service".   No  service   tax was  discharged  in respect  of the third  part considering it to be an indivisible  works  contract  comprising  of both goods  and services  on the  basis of the  decision  of the Tribunal in the case of Daelim Industrial  Co. Ltd vs. CCE, Vadodara [2006(3)  STR  124(T)). Member  (Judicial)  and member  (technical)  had divergent  views  both in respect of taxability  as well as invocation of extended  period and therefore the matter was placed before the third member.

HELD:

The third member distinguished  the decision  in the case of Oaelim Industrial Co. Ltd

(supra) by stating that the said decision has not taken into account the 46th constitutional amendment  which  inserted clause (29A) in Article 366 of the  constitution  mandating  that  the  indivisible  contracts could be split up and a part of it could be subject to tax. The member  relying on the decision  of the five member Bench reported in 2015-TIOL-527-CESTAT-DEL-LB   held that works contract can be vivisected  prior to 01/0612007 and the service portion can be subjected to levy of service tax.  In  respect  of extended  period,  the  member  noted that the same  is a question  of facts and law and stated that  if the Appellant  had  a  bonafide  belief,  they  would have  reflected  the  transaction  as an exempted  service in the  service  tax return  and by not doing  so, they  hac suppressed the material fact from the department.  Further

it was also stated that though there are divergent  views of various forums,  a large number of them are based 0'" Oaelim  Industrial  Co.  Ltd. (supra)  which  is irrelevant  t the  issue  and the  remaining  are expressed  after  200

Thus,  when  tax  was  rightfully  discharged  in respect    : designing  activities  it ought to have been discharged  0 the installation activity being the dominant service in these contracts and accordingly  extended period invokable.