SHETH & SURA ENGINEERING PVT. LTD. Vs. UNION OF INDIA
LAWS(BOM)-2017-8-161
HIGH COURT OF BOMBAY
Decided on August 02,2017

Sheth And Sura Engineering Pvt. Ltd. Appellant
VERSUS
UNION OF INDIA Respondents

JUDGEMENT

ANOOP V.MOHTA,J. - (1.) Rule. Rule is made returnable forthwith. Heard finally by consent of parties.
(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 and Cus., Kerala v. Larsen and Toubro Ltd. 2015 (39) S.T.R. 913 (S.C.) 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 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 simplicities 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 Larsen and Toubro Ltd v. 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 v. 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." ;


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