2016 (2) TMI 315 - AT - Service Tax

Wavier of pre-deposit - Demand of service tax on advance received as per the balance sheet - Rate of composition tax on works contract - The appellant has contended that (i) It opted for Composition scheme for Works Contract Services when the rate of tax was 2%, and therefore the same rate should continue for the entire period of the contract - Held that - While the demands under Show cause dated 21/10/2012 and 19/10/2012 are prima facie not barred by time limit, the appellant has raised the contention with regard to time bar in respect of the show cause notice dated 17/4/2012 which requires detailed analysis which can be taken up only at the time of final hearing. We are however prima facie not with the appellant on the proposition that once composition scheme is opted, the rate of tax thereunder as applicable on the date of opting for the composition scheme is locked for the entire period of implementation of the works contract. - Prima facie case is not favor of assessee - Stay granted partly.

Summary

Issues:
- Dispute over demands under Works Contract service
- Applicability of tax rates under Composition scheme
- Claim of inflated demand due to advances received
- Time limit for demands under show cause notices
- Pre-deposit amount and stay on recovery during appeal

Analysis:
1. Dispute over Demands: The appellant contested demands under Works Contract service, arguing for a consistent 2% tax rate throughout the contract period based on the Composition scheme. They referenced a previous order by the Commissioner (Appeals) supporting their stance. Additionally, they cited a Supreme Court ruling stating no service tax was due on works contracts pre-2007. The appellant also claimed the demand was overstated by Rs. 29.68 crores due to advances being included in service payments.

2. Applicability of Tax Rates: The appellant emphasized that demands under certain show cause notices were calculated at the full tax rate instead of the applicable 2% or 4% under the Composition scheme. They argued for a reduction in the demand amount based on the correct tax rates.

3. Time Limit for Demands: The Departmental Representative (DR) contended that demands within specific periods were valid based on the filing dates of ST-3 returns. The issue of time limitation for one of the show cause notices was raised by the appellant, requiring further examination during the final hearing.

4. Pre-Deposit and Stay Order: After considering both parties' arguments, the Tribunal found merit in the appellant's claim regarding inflated demand and incorrect tax rate calculations. A pre-deposit of Rs. 3 crores was ordered within 8 weeks, with compliance due by a specified date. The remaining liability was stayed pending the appeal, subject to the pre-deposit condition. Failure to comply would result in the dismissal of the appeal.

This detailed analysis highlights the key contentions, legal interpretations, and decisions made in the judgment regarding the disputes over Works Contract service demands, tax rate applicability, time limits for demands, and the pre-deposit requirement with a stay on recovery during the appeal process.