CESTAT, Larger Bench decision in the case of CCE, Raipur Vs M/s BSBK Pvt. Ltd. (2010-TIOL-646-CESTAT-DEL-LB)
The Hon?ble CESTAT, Delhi held in case of Daelim Industrial Co. Ltd Vs CCE, Vadodara (‘Daelim’) (2003-TIOL1 10-CESTAT-DEL) that a works contract cannot be vivisected and a part of it cannot be subjected to service tax. In the case of CCE, Raipur Vs M/s BSBK Pvt. Ltd (2009 (13) STR 26) it was observed by the Hon?ble CESTAT, Delhi that the conclusion in the Daelim case, prima facie, is not in accordance with the law.
Accordingly the Hon?ble CESTAT, Delhi referred the matter to the LB to examine that whether service by way of “advice, consultancy or technical assistance” in the case of turnkey contract will attract service tax.
The issue therefore, was whether a turnkey contract can be vivisected for the purpose of levy of service tax. The grounds put forth by the referring Bench in this matter were as under:
- The 46th amendment to the Constitution of India inserted clause 29A to Article 366 to make inter alia works contract as a deemed sale. After this amendment, a works contract can be dissected for the levy of service tax and sales tax.
- The decision in case of Daelim is not in accordance with the decision of the Hon?ble Supreme Court in case of Bharat Sanchar Nigam Ltd Vs UoI (2006-TIOL-15-SC-CT-LB).
- The subject contract is a single contract involving completion of various works like designing and engineering, erection, testing and commissioning of plant, etc.
- Summary rejection by the Hon?ble Apex Court of the Special Leave Petition („SLP?) filed by the Revenue in case of Daelim cannot be observed as affirmation of decision of Hon?ble CESTAT on merits.
Contentions of the Appellant
Justifying the case that taxable service involved in the execution of a turnkey contract is liable to service tax, the Appellant put forth the following –
