2014 (7) TMI 449 - AT - Service Tax

Valuation - Short payment of service tax - value of taxable services, as declared in the ST-3 Returns during each financial year was much less than the gross amount received for providing various services, as declared on the balance sheets - civil and industrial construction - w.e.f. 01.06.07 this activity was classifiable as Works Contract Service under section 65(105)(zzzza) - Held that - it is seen that the service tax demand on the civil and industrial construction service has been confirmed on the gross amount charged while during the period prior to 01.06.07 the appellant were eligible for exemption under Notification No.1/2006-ST dt. 01.03.06 and accordingly were liable to pay duty on 33% of the gross amount charged if they satisfied the conditions for this notification. During period w.e.f. 01.06.07 their service is classifiable as Works Contract Service and in term of Rule 2A of the Service Tax Valuation Rules, the value of the goods supplied for provision of service tax on which the VAT/Sales Tax had been paid would have to be excluded, but this has not been done. Moreover, during period from 01.06.07 in respect of Works Contract Service , the appellant would also eligible for compounded rate under Works Contract Service (Composition Scheme for Payment of Service Tax) Rules, 2007 if they satisfy the conditions prescribed in this regard but their eligibility for Compound Levy scheme has also not been considered - impugned order is not sustainable - order set aside - Matter remanded back - Decided in favour of assessee.

Issues:
1. Short payment of service tax amounting to Rs. 76,36,660 during 2005-2006 to 2008-2009.
2. Classification of services provided by the appellant.
3. Eligibility for exemption and abatement under Notification No. 1/06-ST.
4. Applicability of Works Contract Service and Service Tax Valuation Rules.
5. Consideration of compounded rate under Works Contract Service (Composition Scheme for Payment of Service Tax) Rules, 2007.

Analysis:

1. The appellant, a private limited company engaged in civil contracts for telecom companies, was found to have short paid service tax amounting to Rs. 76,36,660 during the period of 2005-2006 to 2008-2009. A Show Cause Notice was issued, leading to the confirmation of the service tax demand along with interest and penalties by the Commissioner. The appellant filed an appeal against this order.

2. The classification of services provided by the appellant was crucial in determining the tax liability. The services were initially classified as "Commercial and Industrial Construction Service" and later as "Works Contract Service." The appellant argued for eligibility for exemption and abatement under Notification No. 1/06-ST for the period prior to 01.06.07 and for the application of Works Contract Service rules thereafter.

3. The appellant contended that they were eligible for exemption under Notification No. 1/06-ST before 01.06.07 and for abatement of 67% of the gross amount charged. However, the service tax demand was calculated on the gross amount without any abatement. The eligibility for exemption and abatement was a significant issue in the case.

4. The issue of Works Contract Service classification and the application of Service Tax Valuation Rules were raised during the proceedings. The appellant argued that the cost of goods involved in the execution of Works Contracts, on which VAT/Sales Tax had been paid, should be excluded from the service tax calculation. The proper application of these rules was crucial for determining the correct tax liability.

5. The consideration of the compounded rate under Works Contract Service (Composition Scheme for Payment of Service Tax) Rules, 2007 was another key aspect of the case. The appellant claimed eligibility for the compounded rate under this scheme and argued that the impugned order was not sustainable due to the failure to consider their eligibility for the scheme.

In conclusion, the Tribunal found the impugned order unsustainable and set it aside, remanding the matter for de-novo adjudication. The eligibility of the appellant for exemption, abatement, and the compounded rate under the relevant rules was to be reconsidered during the fresh adjudication process. The appeal and stay application were disposed of accordingly.

← Previous Next →