2014 (10) TMI 132 - AT - Service Tax

Waiver of pre deposit - Valuation - Works contract service for several government departments - Held that - Execution of the works contract had commenced prior to 7-7-2009 and receipt of the consideration for providing such works contract service to NTPC was also prior to 7-7-2009. The inclusion of the value of the transaction covered by the supply contract for assessing the Service Tax liability though after granting the benefit of the composition scheme is therefore, prima facie, unsustainable. The Service Tax liability on the value of the transaction covered by the supply & service works contract is ₹ 36,65,120/-. During personal hearing on 29-1-2013 before the adjudicating authority, the petitioner asserted to have remitted ₹ 6,01,093/- and interest of ₹ 2,07,570/- on an assumption that it had provided Business Auxiliary Service (BAS) to NTPC, on the component of the 5% commission received from NTPC. Prima facie, the classification of the service as works contract service and as concluded by the adjudicating authority and not BAS as the petitioner assumed, appears to be unassailable. The petitioner is however entitled to take credit of the amount of ₹ 6,01,093/- already remitted, but for BAS. On this analysis, the balance Service Tax liability of the petitioner in respect of the transaction value of works contract provided to NTPC is ₹ 30.65 lakhs (approximately) - Conditional stay granted.

Summary

Issues:
1. Service Tax demand for works contract services provided to various State Governments and NTPC.
2. Interpretation of works contract service under Section 65(105)(zzzza) of the Finance Act, 1994.
3. Application of the Explanation to Rule 3(1) of the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007.
4. Assessment of Service Tax liability on the value of the transaction involving supply and service contracts with NTPC.
5. Consideration of the extended period of limitation for invoking the demand.

Analysis:
1. The appellant challenged the Service Tax demand of &8377; 8,47,59,101/- for works contract services provided to various State Governments and &8377; 2,53,22,819/- for services to NTPC. The works involving construction of pipelines for governmental purposes were argued to be excluded from the purview of works contract service under Section 65(105)(zzzza) of the Finance Act, 1994, as they were not for business or industrial purposes. The Tribunal found the conclusion in the impugned order unsustainable and granted waiver of pre-deposit based on prima facie views in a previous stay application.

2. Regarding the demand of &8377; 2,53,22,819/- for services to NTPC, the appellant had two contracts with NTPC, one for supply of goods and the other for services under a composite contract. The adjudicating authority computed the Service Tax liability based on the Explanation to Rule 3(1) of the Works Contract Rules, 2007. However, the Tribunal noted that the Explanation introduced in 2009 included the value of goods and services in the gross amount charged for works contracts. Since the works contract had commenced before the introduction of the Explanation, the inclusion of the supply contract value for assessing Service Tax liability was deemed unsustainable.

3. The Service Tax liability on the composite contract with NTPC was determined to be &8377; 36,65,120/-. The appellant had remitted a portion of this amount assuming it was Business Auxiliary Service (BAS) and not works contract service. The Tribunal upheld the classification as works contract service by the adjudicating authority, allowing credit for the amount already remitted for BAS. The balance Service Tax liability was assessed at approximately &8377; 30.65 lakhs.

4. The appellant contended that the invocation of the extended period for limitations was unsustainable. The Tribunal deferred consideration of this contention to the final hearing, focusing on the pre-deposit requirement. Waiver of pre-deposit was granted on the condition that the appellant remits the balance liability within a specified timeframe, failing which the appeal would be rejected. Upon compliance, all proceedings for recovery of the adjudicated liability were stayed pending appeal disposal.

Conclusion:
The Tribunal analyzed the issues of Service Tax demand for works contract services provided to government departments and NTPC, interpretation of works contract service, application of the Explanation to Rule 3(1) of the Works Contract Rules, assessment of Service Tax liability, and consideration of the extended period of limitation. The decision granted waiver of pre-deposit based on the unsustainable nature of certain assessments and provided a clear direction for compliance and stay of proceedings pending appeal resolution.