2018 (4) TMI 730 - AT - Service Tax

Works contract service - composition scheme - whether the composition scheme under Works Contract can be opted or not in case of ongoing projects on the date when such option is exercised? - Held that - The Tribunal in the case of B.R. Kohli Construction Pvt. Ltd. 2017 (4) TMI 38 - CESTAT NEW DELHI has held that such option can be exercised in case of ongoing projects also - the Appellant is eligible for composition scheme under Works Contract - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Classification of services under Works Contract Service.
2. Denial of composition scheme benefits.
3. Time-barred demand.
4. Penalty imposition justification.

Classification of services under Works Contract Service:
The case involved a dispute regarding the classification of services provided by the Appellant under the category of "Commercial & Industrial Construction Services" versus "Works Contract Services." The Appellant had transitioned to paying service tax under the latter category and was issued a show cause notice for differential service tax. The issue revolved around the applicability of Rule 3(3) of Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007, and CBEC Circular No. 98/1/2008. The Tribunal analyzed previous judgments and held that the Appellant's services were correctly classifiable as Works Contract Service. The Tribunal emphasized that the composition scheme cannot be denied based solely on the discharge of service tax under a different head before a specific date.

Denial of composition scheme benefits:
The Appellant argued that the option to opt for the composition scheme under Works Contract did not require written confirmation and could not be denied for that reason. The Revenue contended that the option had to be exercised before changing the service classification. The Tribunal referred to the case of B.R. Kohli Construction Pvt. Ltd. and held that the composition scheme could be opted for ongoing projects as well. It noted that the denial of the scheme was based on the Appellant's previous classification under a different service category, which was deemed incorrect due to legal precedents.

Time-barred demand:
The Appellant claimed that the demand was time-barred due to no suppression of facts. However, the Tribunal did not delve deeply into this issue as the focus was primarily on the classification of services and the denial of composition scheme benefits.

Penalty imposition justification:
The Tribunal found that the imposition of penalties on the Appellant was not justified. It highlighted that the legal position regarding the tax liability of composite works contracts had been a subject of numerous litigations and was clarified only after a decision by the Supreme Court. Therefore, the Tribunal ruled in favor of the Appellant, allowing the appeal concerning the differential service tax and penalties while setting aside the impugned order.

Overall, the Tribunal held that the Appellant was eligible for the composition scheme under Works Contract, and the appeal was allowed based on the legal interpretations and precedents discussed during the proceedings.