2012 (8) TMI 783 - AT - Service Tax

Completion and finishing services denial of benefit of Notification No. 1/2006-S.T. Held that - There is clear provisions in the Notification No. 1/2006-S.T. that 67% abatement would not be available in respect of completion and finishing services and since the activities of the appellant is completion and finishing services in respect of the construction of commercial or industrial complexes, 67% abatement would not be available to them - since the amount on which the VAT has been paid is the value of the material used for providing the services, this material cannot be said to have been sold within the meaning of this terms as defined is Section 2(h) of the Central Excise Act - benefit of Notification No. 12/2003-S.T. would not be available

Summary

Issues:
1. Interpretation of Notification No. 1/2006-S.T. regarding abatement for completion and finishing services.
2. Eligibility for benefit under Notification No. 12/2003-S.T. for service tax.

Analysis:
1. The dispute in this case revolved around the interpretation of Notification No. 1/2006-S.T. regarding the abatement for completion and finishing services provided by the appellant. The appellant availed a 67% abatement from the gross amount received for the services, while the department contended that this abatement was not applicable to completion and finishing services. Consequently, a service tax demand was confirmed against the appellant, and penalties were imposed. The Commissioner (Appeals) upheld the service tax demand but allowed the appellant to avail cenvat credit for input services. The appellant argued that the service tax paid exceeded their liability due to the value of materials used, which they claimed should be eligible for abatement under Notification No. 12/2003-S.T.

2. The appellant further contended that for the period after the introduction of work contract services, the service tax should be payable on the gross amount received minus the value of goods on which sales tax (VAT) was paid. They claimed that 80% of the invoice value consisted of goods on which VAT had been paid, thus reducing their taxable amount. The department opposed this argument, asserting that the appellant's activities fell under Commercial or Industries Construction Service, making them ineligible for the abatement under Notification No. 1/2006-S.T. The department also argued against the appellant's eligibility for the benefit of Notification No. 12/2003-S.T., stating that the materials used could not be considered sold to clients merely because VAT had been paid on them.

3. The Tribunal carefully considered both sides' submissions and examined the records. It was established that the appellant provided completion and finishing services for the construction of industrial complexes, making them ineligible for the 67% abatement under Notification No. 1/2006-S.T. The Tribunal also found that the materials used, on which VAT had been paid, did not qualify as sold within the legal definitions, thus disqualifying the appellant from the benefit of Notification No. 12/2003-S.T. Citing relevant case law, the Tribunal ruled that the appellant must deposit a specified amount within a set period, failing which the requirement of pre-deposit for the remaining service tax demand, interest, and penalty would be enforced.