2016 (4) TMI 893 - AT - Service Tax

Entitlement for abatement - claimed at 67% - Works contract - transport of goods by Road , erection, commissioning and installation , and works contract service - Held that - the liability in works contract is clarified by Honourable Supreme Court in the case of Larsen and Toubro. It has been held by the Apex Court that even prior to 1/6/2007, where the material component is involved in execution of erection, commissioning & installation services, the same shall be classified under the works contract and no tax can be levied on works contract prior to 1/6/07 in absence of there being a specific provision in the finance Act tax to tax service element in the composite contract. Therefore, appellant is entitled for abatement. Deposit of tax - Clerical mistake in the challan - nothing on record which shows that the appellant have made reasonable efforts with the relevant bank where the challan was deposited to get the error corrected - Held that - as there being mistake in the assessee code/registration number of assessee, the matter is remanded back in the interest of Justice to the adjudicating authority, who shall issue the necessary directions to the concerned bank to allow rectification in the challan and credit the same to the Govt. account. Penalties imposed under Section 77 & 76, are set aside. Interest under Section 75 shall be recalculated as the payment shall relate back to the date of representation of the Cheque. - Decided partly in favour of appellant

Summary

Issues:
1. Abatement of service tax on works contract
2. Clerical mistake in depositing service tax
3. Imposition of penalties under Section 76 and 77
4. Interest calculation under Section 75

Abatement of service tax on works contract:
The Appellant, a service provider, was issued a show cause notice for short payment of service tax due to inadmissible abatement under notification number 15/2004. The Appellant argued that certain amounts received pertained to a previous financial year and involved labour and material in a works contract. The Appellant contended that they had deposited service tax on a portion of the realized amount after availing material rebate. The Tribunal referred to the case of Larsen and Toubro where it was clarified that in works contracts involving a material component, no tax could be levied on works contracts prior to a specific date. Consequently, the Tribunal held in favor of the Appellant on the abatement issue related to the material component.

Clerical mistake in depositing service tax:
Regarding the second issue of a clerical mistake in the deposit of service tax, the Appellant claimed that a payment made in September 2008 was not credited due to an error in mentioning the assessee code. The Tribunal, noting the absence of evidence showing efforts to rectify the error with the bank, remanded the matter to the adjudicating authority for necessary directions to rectify the challan and credit the amount to the government account.

Imposition of penalties under Section 76 and 77:
The Tribunal set aside the penalties imposed under Section 76 and 77, considering the circumstances of the case, particularly the clerical error in depositing the tax amount. The Tribunal found no deliberate default on the part of the Appellant, leading to the decision to waive the penalties.

Interest calculation under Section 75:
Regarding the interest calculation under Section 75, the Tribunal directed a recalculation as the payment related back to the date of representation of the cheque. This adjustment was deemed necessary for accurate interest computation. Consequently, the Tribunal allowed the appeal in part and remanded it in part for further proceedings.

This judgment by the Appellate Tribunal CESTAT ALLAHABAD addressed issues related to abatement of service tax on works contract, a clerical mistake in depositing service tax, imposition of penalties under Section 76 and 77, and interest calculation under Section 75. The Tribunal ruled in favor of the Appellant on the abatement issue concerning the material component of works contracts and remanded the matter of the clerical error for rectification. Additionally, the penalties imposed were set aside, and a recalculation of interest was ordered for accurate computation.