Whether a contract of maintenance can be held as divisible if material portion and service portion is separately mentioned in the Contract between the parties? Held, yes.

Balaji Tirupati Enterprises vs. CCE. [2014] 43 taxmann.com 42 (New Delhi – CES TAT)

Facts:

In this case, the issue before the Tribunal was that in terms of works contract of repair of transformers, whether the goods deemed to be sold in the execution of works contract were liable for Service Tax.

Held:

The Tribunal on the perusal of the Works Order executed by the Appellant with the power supply authorities categorically observed that, both parties to the contract were conscious of the terms which involved both sales and service. The composition of the goods used for repair contract of transformer is patently clear. Tribunal relied upon the decision in the case of CCEvs. Kailash Transformers [Final Order No. ST/Al402/12 23-05-2012]in which the Tribunal assigned weight age to the manner how the parties operated with the understanding of sale of goods as well as service provided to effectuate the contract. Accordingly it was held that the Finance Act, 1994 is not a Commodity Taxation Law. As a result of which the goods which were deemed to be sold in the execution of works contract shall not enter into the purview of the levy of the Service Tax.

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