2016 (3) TMI 574 - AT - Service Tax

Leviability of Service tax - Works Contract - Services rendered both labour and supply of material for the period prior to 01.06.2007 - Held that - whatever amount is recovered in the name of service tax for service rendered prior to 1.6.2007 was required to be deposited in the government account in terms of section 73A of the Finance Act 1994. The introduction of works contracts service w.e.f. 01/06/2007 (under which the impugned service is classifiable), the government introduced Works Contract (Composition Scheme for Payment of Service Tax) Rules 2007 and also incorporated Rule 2A of the Service Tax (Determination of Value) Rules 2006, for determination of value of service portion in the execution of works contracts. In the light of these developments, no service tax is leviable here for the period prior to 01/06/2007 and for the remaining period. - Matter remanded back

Summary

Issues involved:
- Submission of additional grounds under CESTAT (Procedure) Rules, 1982.
- Confirmation of service tax demand for a specific period.
- Eligibility for abatement under notifications 15/2004 - ST and 1/2006 - ST.
- Applicability of Supreme Court judgment in the case of Larsen & Toubro Ltd.
- Computation of demand and penalty.
- Works contracts service and payment of service tax.

Submission of Additional Grounds:
The appellant filed a miscellaneous application seeking permission to submit additional legal nature submissions under CESTAT (Procedure) Rules, 1982, which was granted by the Tribunal.

Confirmation of Service Tax Demand:
An appeal was filed against the order confirming a service tax demand of Rs. 2,15,40,896 for a specific period. The demand was based on the nature of service provided by the appellant, failure to declare the value of material received free of cost, and the ineligibility for abatement under certain notifications. The appellant later started discharging service tax liability on 20% of the gross amount charged, claiming VAT payment on the rest 80%, but failed to provide supporting documents.

Applicability of Supreme Court Judgment:
The appellant cited the Supreme Court judgment in Larsen & Toubro Ltd. vs. C.C.E., arguing that no service tax was payable before 01/06/2007 as the service was rendered under works contracts. The appellant claimed to have evidence of material value and eligibility for the composition scheme. The Tribunal acknowledged the need to recompute the demand in light of the Supreme Court judgment.

Computation of Demand and Penalty:
The Revenue contended that the appellant lacked evidence on material value and had availed input credit. It was argued that abatement benefits were not available due to the nature of the service provided. The Tribunal agreed that the demand needed to be recalculated based on the Supreme Court judgment and the new rules introduced for works contracts service.

Works Contracts Service and Payment of Service Tax:
Considering the nature of service rendered under works contracts involving both labor and material supply, the Tribunal held that no service tax was payable before 01/06/2007. For the period after that date, the appeal was allowed for remand to the primary authority for re-computation of demand as per works contract provisions. The penalty was also to be reassessed based on the recomputed demand and the appellant's submissions.