2016 (6) TMI 775 - AT - Service Tax

Works contract service - Commercial or Industrial Construction Services (CICS) - demand was confirmed without allowing 67% abatement under Notification No.15/2004-ST or 1/2006-ST - Held that - the demand for the Period prior to 01.06.2007 is not sustainable. Subsequent thereto (i.e. w.e.f. 01.06.2007) the service rendered will be correctly classifiable under Works Contract Service 65 (105) (zzzza) of Finance Act, 1994 and, therefore, the valuation for the purpose of levying service tax will have to be done under the provisions of Rule 2 A of the Service Tax (Determination of Value) Rules, 2006 because the appellant as per the records had not opted for the Compensation Scheme in terms of Rule 3 of the works contract (Composition Scheme for payment of Service Tax) Rules, 2007. - Matter remanded back for de-dono adjudication - Decided partly in favor of assessee.

Summary

Issues:
1. Service tax demand confirmation without allowing abatement under Notification No.15/2004-ST or 1/2006-ST.
2. Applicability of service tax for works contracts prior to 01.06.2007 in light of the Hon'ble Supreme Court judgment.
3. Cenvat credit reversal and service tax liability.
4. Benefit of Composition Scheme for reducing service tax payable.
5. Determination of service tax leviable under Rule 2A of the Service Tax (Determination of Value) Rules, 2006.
6. Evidence requirement for material cost percentage in determining service tax liability.
7. Sustainability of demand post-01.06.2007 under Works Contract Service classification.

Analysis:
1. The appellant contested the service tax demand confirmation citing non-allowance of abatement under Notification No.15/2004-ST or 1/2006-ST. The Tribunal noted the contentions and proceeded to address the issue.

2. Regarding the applicability of service tax for works contracts before 01.06.2007, the Tribunal referred to the Hon'ble Supreme Court judgment in the L&T case. It ruled that no service tax is leviable for services rendered under works contracts pre-01.06.2007. This formed a crucial aspect of the decision-making process.

3. The matter of cenvat credit reversal and service tax liability was raised by the appellant, emphasizing the already reversed credit and the absence of service tax liability up to 31.05.2007 based on the L&T judgment. The Tribunal took this into consideration while evaluating the overall tax liability.

4. The appellant sought the benefit of the Composition Scheme to reduce the service tax payable amount. This request was analyzed by the Tribunal in conjunction with other aspects of the case.

5. In determining the service tax leviable, the Tribunal referred to Rule 2A of the Service Tax (Determination of Value) Rules, 2006. This rule was crucial in calculating the correct service tax amount owed by the appellant.

6. The need for evidence regarding the material cost percentage in determining service tax liability was highlighted during the proceedings. The Tribunal considered this requirement for accurate computation of the tax demand.

7. Post-01.06.2007, the sustainability of the demand under the Works Contract Service classification was discussed. The Tribunal opined that the service rendered from this date onwards falls under this classification, necessitating a revaluation of the demand based on Rule 2A of the Service Tax Rules.

In conclusion, the Tribunal allowed the appeal for a de-novo adjudication, setting aside the demand pre-01.06.2007 and directing a recomputation of the demand for the subsequent period based on Rule 2A. The appellant was granted an opportunity to be heard, and the penalty amount was to be redetermined accordingly.