2016 (10) TMI 830 - AT - Service Tax

Taxability - construction services in relation to Hydro Power Projects - works contract service - Held that - the amended provisions of the Rules clarify that the new provisions shall not apply to a Works Contract which had commenced or payment made thereof on or before 07.07.2009. In the instant case, Works Order related to para 5(a) of Order-in-Original was obtained by appellant on 15.11.2008, hence unless it is proved that the work has not commenced etc., before 07.07.2009, the appellants will be entitled to the benefit of unamended provisions. With respect to Work orders referred to para 5 (b) and 5 (c), we are of the opinion that the appellant should be given a proper opportunity to file detailed submissions along with documents as reply to SCN, which he omitted to do earlier and also an opportunity of personal hearing. In such circumstances, it is deem fit that the impugned order with regard to demand of WCS be set aside, and matter be remanded to the adjudicating authority for denovo adjudication, which we hereby do. It is however made clear that we do not interfere with the demand of ₹ 1,10,485/- along with interest thereon relating to the Management Consultancy services which is confirmed by the adjudicating authority. Appeal disposed off - matter remanded.

Issues:
1. Whether the appellant's construction services for Hydro Power Projects were exempt from service tax.
2. Applicability of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 to the appellant's case.
3. Adequacy of documentation provided by the appellant for canals constructed for industrial purposes.
4. Correctness of the adjudicating authority's order regarding the demand for Works Contract Service (WCS).
5. Whether the appellant should be given an opportunity for detailed submissions and a personal hearing.

Analysis:

1. The appellant contended that they did not contest the demand for service tax related to Management Consultancy services but focused on the WCS. The appellant believed that construction services for canals were exempt from tax, leading to non-payment. However, the revenue argued that the services were commercial construction ineligible for exemption, as they were related to a Hydro Power Project developed for revenue generation by a private agency. A show cause notice was issued for recovery of service tax amounts and penalties. The adjudicating authority confirmed the proposals, leading to the appeal.

2. The appellant argued that the denial of the composition scheme by the adjudicating authority was unjustified. They referred to Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, and subsequent amendments, highlighting that the appellant should benefit from the composition scheme applicable before the 2009 amendment. The tribunal agreed that the appellant should be entitled to the unamended provisions for works contracts commenced before the specified date, remanding the matter for denovo adjudication.

3. Regarding the WCS related to canals constructed for industrial purposes, the appellant claimed that a composition scheme should apply, requesting a 40% abatement. However, the adjudicating authority found insufficient documentary evidence provided by the appellant, specifically the absence of Running Account bills. The tribunal emphasized the need for detailed submissions and proper documentation, indicating that the appellant failed to present a complete defense due to not responding to the show cause notice adequately.

4. The appellate tribunal, after hearing both sides and reviewing the records, acknowledged the merit in the appellant's contentions. They noted that the appellant should have the opportunity to provide detailed submissions and documents in response to the show cause notice, along with a chance for a personal hearing. Consequently, the tribunal set aside the impugned order regarding the demand for WCS, remanding the matter to the adjudicating authority for further consideration. However, the demand related to Management Consultancy services was upheld.

5. In conclusion, the tribunal partially allowed the appeal by remanding the matter for denovo adjudication, emphasizing the importance of providing detailed submissions and documentation to support the appellant's case. The decision highlighted the significance of procedural fairness and the right to a proper defense in tax-related matters.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the arguments presented by both parties, and the tribunal's decision, ensuring a thorough understanding of the legal aspects and implications of the case.

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