2013 (12) TMI 1276 - AT - Service Tax

Stay application - Demand of service tax - Works Contract Service - Held that - department should have provided better guidance to the applicant when he appeared before them to give a statement. Considering the facts and circumstances of the case, the applicant is directed to deposit Rs.24,000/- (Rupees Twenty four thousand only) within a period of 4 weeks and report compliance by 25.6.2013 for admission of appeal. Upon such deposit, predeposit of balance dues arising from the impugned order is waived and there shall be stay on collection of such dues during pendency of appeal - Prima facie case not in favour of assessee - Stay granted partly.

Issues:
1. Interpretation of Works Contract (Compounding Scheme for Payment of Service Tax) Rules, 2007.
2. Clarification on the applicant's tax liability for civil works executed for oil companies.
3. Assessment of the applicant's payment and option under the works contract scheme.
4. Guidance provided by the department to the applicant.

Analysis:
1. The judgment revolves around the interpretation of the Works Contract (Compounding Scheme for Payment of Service Tax) Rules, 2007. The applicant, a civil contractor executing works for oil companies, initially refrained from paying service tax due to a legal challenge by an association of civil contractors. Subsequently, the applicant registered for service tax under the works contract service category. The revenue contended that the applicant did not opt for the compounding scheme and should have paid tax on the entire service value. The applicant's consultant argued for a split in the value based on different tax rates for specific periods, leading to a difference in tax liability.

2. The court considered the confusion arising from a letter dated 3.12.2008 submitted by the applicant, which indicated uncertainty regarding the tax payment scheme. Despite the department's reliance on this letter, the court observed that the applicant's initial tax payment demonstrated an intention to opt for the works contract scheme. The lack of clear guidance from the department during the applicant's statement further complicated the matter, prompting the court to direct the applicant to deposit the outstanding amount of Rs.24,000 within a specified timeframe.

3. The judgment underscores the department's responsibility to provide appropriate guidance to taxpayers, especially in complex matters like service tax schemes. Acknowledging the applicant's partial compliance and the need for clarity in tax obligations, the court waived the predeposit of the remaining dues and granted a stay on collection pending the appeal process. This decision aimed to balance the taxpayer's obligations with the department's duty to ensure compliance and clarity in tax matters, emphasizing the importance of effective communication and guidance in tax administration.

Conclusion:
The judgment highlights the significance of clear communication and guidance in tax matters, particularly concerning complex schemes like the Works Contract (Compounding Scheme for Payment of Service Tax) Rules, 2007. It emphasizes the need for both taxpayers and tax authorities to ensure mutual understanding and compliance to avoid confusion and disputes. The court's decision to direct the applicant to deposit the outstanding amount while waiving predeposit reflects a balanced approach to resolving the tax liability issue and maintaining fairness in the appeal process.

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