2015 (2) TMI 1017 - AT - Service Tax

Waiver of pre deposit - Commercial or Industrial Construction Service - Held that - On perusal of Notification No.32/2007 (ST) dated 22.5.2007, which stipulates that no CENVAT credit be availed on the inputs and if the credit is availed, then it should be restricted at 40% subject to service tax at the rate of 4.12% being paid on the total invoice value of the service after availment of said CENVAT credit on the inputs. The learned counsel contested the adjudication order that this option came by Notification No.1/2011-ST (supra). However, we find some force in the submission of the learned counsel on the ground of limitation. Prima facie, we find there is a dispute regarding the eligibility of the benefit of Notification No.32/2007-ST. At this stage, the learned counsel submits that they have already paid a sum of ₹ 38,23,115/- out of which ₹ 33,39,585/- has been appropriated by the adjudicating authority. We find that the amount paid by the applicant is sufficient for the purpose of waiver of predeposit of balance dues. Accordingly, waiver of predeposit of balance dues is granted and recovery thereof is stayed during the pendency of the appeal - Stay granted.

Summary

Issues:
1. Tax liability under Works Contract Service
2. Eligibility for CENVAT credit
3. Applicability of Notification No.32/2007 (ST)
4. Invocation of extended period of limitation

Analysis:
1. The judgment revolves around the tax liability of the applicant under Works Contract Service. The adjudicating authority had confirmed a demand of service tax along with interest and penalty for a specific period. The applicant, engaged in construction services, argued that they are eligible for CENVAT credit through their subcontractor, and that as developers, they are not liable to pay tax, citing a relevant case law. The applicant also contended that the extended period of limitation should not be invoked due to timely filing of returns.

2. The applicant's counsel highlighted that the sub-contractor had paid the tax on the project, making them eligible for CENVAT credit that would exceed the tax liability. The counsel referenced Notification No.1/2011-ST to support their claim regarding the CENVAT credit entitlement. The argument also emphasized the developer's position, asserting that no tax should be levied on them based on a precedent set by the Madras High Court.

3. The Revenue's representative reiterated the Commissioner's findings, emphasizing that the applicant had not disputed their liability to pay tax or opted for the works contract composition scheme. The discussion delved into the provisions of Notification No.32/2007 (ST) which restricts CENVAT credit to 40% of the service tax paid on the total invoice value after availing credit on inputs. The tribunal acknowledged a dispute regarding the eligibility for this benefit and noted the applicant's partial payment, granting a waiver of the balance dues pending appeal.

4. Upon examining the arguments and relevant notifications, the tribunal found merit in the applicant's contentions regarding the limitation period and the eligibility for benefits under Notification No.32/2007 (ST). The decision to grant a waiver of predeposit and stay the recovery of the balance dues during the appeal process was based on the sufficient amount already paid by the applicant. The judgment reflects a nuanced analysis of the tax liability issues, CENVAT credit entitlement, and the application of relevant notifications, ultimately providing relief to the applicant pending further proceedings.