2015 (11) TMI 1259 - AT - Service Tax

Waiver of pre deposit - commercial or industrial construction service - benefit of Notification No. 1/2006-ST - Inclusion of value of free supply material - Held that - No service tax was payable for the service rendered under works contracts prior to 1.6.2007. However, the amount deposited by it during the said period had been recovered from the customers and therefore the appellant is not entitled to refund thereof. Consequently the appellant cannot count it towards any pre-deposit - during period after 1.6.2007, at some point, the appellant started paying duty under Composition Scheme for works contract service which during the relevant period did not disallow availment of Cenvat credit in respect of input service. As regards the contention that there is no basis to infer that it has recovered an amount of ₹ 1,41,91,440/- towards service tax but deposited only ₹ 71,57,079/-, we find that primary adjudicating authority has taken into account the contention of the appellant and gave a finding as to how those figures were correctly worked out. It has observed that while the appellant started paying service tax under Composition Scheme for works contract service, it continued to recover higher amount of service tax by charging service tax from the customer at 33% of the value. Thus It is clear that as against recovery of ₹ 1,41,91,440/- towards service tax it only deposited ₹ 71,57,079/- and retained ₹ 70,34,361/-. Further the challans under which this amount is claimed to have been deposited do not bear any link with the impugned demand nor did the appellant claim so before the lower authorities. - Partial stay granted.

Summary

Issues:
Service tax demand under commercial or industrial construction service, denial of benefit of Notification No. 1/2006-ST, inclusion of value of free supply material, Cenvat credit on input services, recovery and deposit of service tax amount, denial of 67% abatement, validity of demand calculation, compliance with pre-deposit requirements.

Analysis:
The appellant filed a stay application and appeal against a service tax demand confirmed for the period 6/2006 to 3/2008, totaling &8377; 3,82,30,870, under commercial or industrial construction service. The demand was based on non-inclusion of the value of free supply material and taking Cenvat credit on input services, resulting in short payment of &8377; 3,11,96,509. Additionally, a component of &8377; 70,34,361 was confirmed due to discrepancies in the amount recovered and deposited towards service tax.

The appellant contended that service was provided under works contract service and that no service tax was leviable up to 31.5.2007 based on a Supreme Court judgment. The appellant also argued for the benefit of 67% abatement citing a CESTAT judgment. The respondent raised concerns about the denial of Notification No. 1/2006-ST benefit and the lack of linkage between the deposited amount and the demand.

The tribunal acknowledged that no service tax was payable before 1.6.2007 for works contracts and that the appellant had recovered the amount deposited during that period from customers. The tribunal upheld the denial of 67% abatement due to Cenvat credit on input services. It noted the appellant's shift to the Composition Scheme post-1.6.2007, allowing Cenvat credit. The tribunal also addressed the discrepancy in the recovered and deposited service tax amount, concluding that the appellant retained an excess amount.

Considering the analysis, the tribunal ordered a pre-deposit of &8377; 1.5 crores along with interest to meet legal requirements. Compliance was mandated within six weeks, failing which the appeal would be dismissed. The tribunal stayed recovery of the remaining liability during the appeal's pendency, subject to the pre-deposit compliance by the specified date.