Service Tax – Vivisection of composite contract – the Daelim Dilemma continues
In the famous Daelim Industrial Co case - , the Tribunal held that a composite contract cannot be vivisected to levy Service Tax on a part of it and this decision was upheld by the Supreme Court. But even after five years, the issue is still live.
Recently there was an interesting situation in the Delhi Bench of the Tribunal, where one Bench held that vivisection was possible and another held that it was not possible – of course both were stay orders. Incidentally there was a common Member in both the Benches!
In the meantime, the issue was before a Larger Bench.
The DR relied upon the decision in BSBK Pvt Ltd. wherein the Tribunal after distinguishing the Daelim decision held that since separate bills were raised by the assessees in respect of designing and engineering, the turnkey project contract was divisible and services rendered by the assessee were covered under the category of consulting engineer and liable to service tax.
On the other hand, the assessee justified their claim by relying on the Tribunal's order in Larsen & Toubro Ltd.,
When the Tribunal heard the matter in August 2007, it observed that in view of the two conflicting decisions, the matter needed to be referred to the Larger Bench. [See ]
By the time the Larger Bench was constituted and the matter was heard, it was dawn of a new year 2008. Incidentally, the BSBK (P) Ltd. case had by then made its journey to the Apex Court and the Supreme Court vide its order dated 30.11.2007, in SLP 817/2007, set aside the Tribunal's order on the ground that it was an ex-parte order and remanded the matter to the Tribunal.
So, when the Larger Bench heard the matter, there were no conflicting views existing, the only view that was confirmed by the Apex Court was the decision of the Tribunal in Daelim Industrial Co.
The Larger Bench, therefore, held that no orders were called for on the issue referred to it as, on date, no conflict existed by way of varying or divergent orders of the Tribunal.
Accordingly, the case is sent back for fresh decision to Division Bench which had referred the matter in the first place.
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