[2015-TIOL-1453-CESTAT-MUM] Larsen and Toubro Ltd vs. Commissioner of Service Tax, Mumbai.

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 Daelim 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 01/06/2007 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 had 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 on Daelim Industrial Co. Ltd. (supra) which is irrelevant to the issue and the remaining are expressed after 2007. Thus, when tax was rightfully discharged in respect of designing activities it ought to have been discharged on the installation activity being the dominant service in these contracts and accordingly extended period invokable.