2013 (8) TMI 642 - AT - Service Tax

Commercial or Industrial Construction Service - Works Contract Services - Assesse were engaged in providing Commercial or Industrial Construction Service in respect of construction of residential complex and Works Contract Services during the relevant period - Revenue was of the view that any payment @4% of the service tax under the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, during the relevant period, an assessee had to exercise their option in writing to the concerned authority Held that - Prima facie the Applicant was required to intimate the Department stating that they would be paying service tax @4% instead of 12%/10% by exercising their option under Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. Waiver of Pre-deposit - Taking into consideration the interest of the revenue as well as the financial condition of the Applicant and also the principle of law laid down relating to disposal of stay applications by the Hon ble Apex Court and High Courts - the Applicant could not able to make out a prima facie case for total waiver of pre-deposit of the dues - 25% of the duty to be deposited - rest of the duty to be waived till the disposal Conditional Stay granted.

Summary

Issues:
Application for waiver of predeposit of service tax and penalty under Section 77 of the Finance Act, 1994.

Analysis:
The Applicant sought waiver of predeposit of service tax and penalty, claiming financial crisis. The Applicant provided 'Commercial or Industrial Construction Service' and 'Works Contract Services' during the relevant period. The Chartered Accountant stated that they paid duty at 4% instead of the applicable rate without exercising the option in writing as required by the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. The Applicant's financial difficulties were highlighted, and they were unable to predeposit the entire dues adjudged. The Revenue argued that without exercising the option in writing, the Applicant could not avail the benefit of paying service tax at a concessional rate.

The Tribunal examined the records and noted that the Applicant had indeed provided the mentioned services during the relevant period. The Tribunal emphasized Rule 3(3) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, which mandates the assessees to exercise their option before paying service tax at a concessional rate. The Rule specifies that the option, once exercised, is applicable for the entire works contract and cannot be withdrawn until completion. The Tribunal found that the Applicant failed to establish their claim for paying service tax at 4% instead of the applicable rate of 12%/10%.

Considering the interests of both the revenue and the Applicant's financial condition, the Tribunal held that the Applicant did not make a prima facie case for a total waiver of predeposit. The Tribunal directed the Applicant to deposit 25% of the service tax involved within 10 weeks, with compliance to be reported by a specified date. Upon compliance, the balance dues would be waived, and recovery stayed during the appeal's pendency. Failure to deposit the specified amount would lead to the dismissal of the Appeal without further notice.

In conclusion, the Tribunal found that the Applicant did not fulfill the requirements under the relevant rules to avail the benefit of paying service tax at a lower rate. The Tribunal balanced the interests of the revenue and the Applicant's financial situation by ordering a partial deposit of the service tax and penalty amount.