Bombay High Court
Sheth & Sura Engineering Pvt Ltd vs Union Of India And 3 Ors on 2 August, 2017
Bench: Anoop V. Mohta
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
CENTRAL EXCISE APPEAL NO. 17 OF 2016
Sheth & Sura Engineering Pvt Ltd. .... Appellant
vs
1 Union of India,
2 The Customs Excise & Service Tax
Appellate Tribunal, West Zonal Bench,
Mumbai 400 009.
3 The Commissioner of Central Excise,
Nagpur Commissionerate, Nagpur-440001
4 The Assistant Commissioner of Customs &
Central Excise, Amravati 444 606. .... Respondents
Mr. Anupam Dighe with Ms. Chandni Tanna I/by India Law Alliance
for the Appellant.
Mr. M. Dwivedi, Senior Standing Counsel for Respondents
CORAM: ANOOP V. MOHTA AND
SMT. BHARATI H. DANGRE, JJ.
DATE : August 2, 2017
ORAL JUDGMENT (Per Anoop V. Mohta, J.):
1 Rule. Rule is made returnable forthwith. Heard finally by
consent of parties.
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2 The writ petition is against the service tax authority. The
Appellant has raised various issues around his rejection of Application
for refund of service tax under Section 11B of the Central Excise Act,
1944 (The Excise Act). Now pressing for reliefs in view of the
Supreme Court judgment in Commissioner of C. Ex & Cus., Kerala v.
Larsen & Toubro Ltd.1 dealing with the related basic concepts of
"Works Contract - Indivisible works contracts" and related principles.
The reliance is placed on paragraphs 15 and 41 which read thus:
"15 ...... This judgment, therefore, clearly and
unmistakably holds that unless the splitting of an
indivisible works contract is done taking into account
the eight heads of deduction, the charge to tax that
would be made would otherwise contain, apart from
other things, the entire cost of establishment, other
expenses, and profit earned by the contractor and
would transgress into forbidden territory namely into
such portion of such cost, expenses and profit as would
be attributable in the works contract to the transfer of
property in goods in such contract. This being the case,
we feel that the learned counsel for the assessees are
on firm ground when they state that the service tax
charging section itself must lay down with specificity
that the levy of service tax can only be on works
contracts, and the measure of tax can only be on that
portion of works contracts which contain a service
element which is to be derived from the gross amount
charged for the works contract less the value of
property in goods transferred in the execution of the
1 2015 (39) S.T.R. 913 (S.C.)
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works contract. This not having been done by the
Finance Act, 1994, it is clear that any charge to tax
under the five heads in Section 65(105) noticed above
would only be of service contracts simpliciter and not
composite indivisible works contracts.
41 We are afraid that there are several errors
in this paragraph. The High Court first correctly holds
that in the case of composite works contract, the
service elements should be bifurcated, ascertained and
then taxed. The finding that this has, in fact, been
done by the Finance Act, 1994 Act is wholly incorrect
as it ignores the second Gannon Dunkerly decision of
this Court. Further, the finding that Section 67 of the
Finance Act, which speaks of "gross amount charged",
only speaks of the "gross amount charged" for service
provided and not the gross amount of the works
contract as a whole from which various deductions
have to be made to arrive at the service element in the
said contract. We find therefore that this judgment is
wholly incorrect in its conclusion that the Finance Act,
1994 contains both the charge and machinery for levy
and assessment of service tax on indivisible works
contracts."
3 The Petitioners' Application for refund was rejected and
further confirmed by the Customs, Excise, Service Tax Appellate
Tribunal (CESTAT) by order dated 19 May 2015 by observing that -
"4 We find that the issue involved in this case is
whether prior to 1/6/2007, works contract can be
vivisected into various component services such as
'erection and commissioning' which were in force from
the year 2003. We note that matter has finally been
put to rest by the Larger Bench decision in the case of
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Larsen & Toubro Ltd vs. Commr. Of S. Tax Delhi [2015
(38) STR 268 (Tri. LB)] which also refers to Delhi High
Court decision in the case of G.D. Builder v. Union of
India [2013 (32) STR 673 (Del)]. The Larger Bench
decision also distinguished the case of Commissioner
vs. Turbotech Precision Engineering Pvt Ltd. The
Larger Bench held that for the period prior to
introduction of Works Contract service, a contract can
be vivisected and if the service involved is covered
under the 'Erection, Commissioning and installation
service, such contract would be leviable to service tax.
In view of the stated position appeal is rejected."
4 The Supreme Court, considering the scheme around the
"works contract" and or "indivisible works contract" has held as
observed in above para (2) that itself, is sufficient to interfere with the
order passed by the CESTAT. The unsustainable impugned order was
based upon Larsen & Toubro Ltd vs. Commr. Of S. Tax Delhi [2015 (38)
STR 268 (Tri. LB)] and G.D. Builder v. Union of India - 2013 (32)
STR 673 (Del).
5 The findings given by the Supreme Court in Larsen &
Toubro (supra), that "works contract" cannot be vivisected into
various components. It cannot be taxed under different Acts. The
work contract service involved in the present case, the Erection,
Commissioning and Installation, would not be leviable to service tax
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as demand was made prior to 1 June 2007. Hence, the Appeal
deserves to be allowed.
6 In the result, the following order :
ORDER
(a) The Central Excise Appeal is accordingly allowed.
(b) Rule made absolute accordingly.
(c) No costs.
(BHARATI H. DANGRE, J.) (ANOOP V. MOHTA, J.)
