2018 (4) TMI 1322 - AT - Service Tax

Woks contract service - Construction services - composite contract - abatement - composition scheme - Held that - the dispute for the period after 1st June 2007 arises merely from technical lacuna. The appellant, as provider of works contract service , is entitled to the composition scheme which has been designed to limit the tax to the service component of composite contract. The failure to intimate exercise of the option, in the face of eligibility should not saddle the appellant with the additional burden of duty - the disallowance of the benefit of composition is not correct - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility for abatement and composition scheme for service tax liability.
2. Dispute regarding tax liability on composite contracts before and after 1st June 2007.
3. Interpretation of Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007.
4. Impact of delayed intimation of option for composition scheme.

Analysis:
1. The appellant, a provider of construction services, faced proceedings for availing ineligible abatement and delayed intimation of option for composition scheme. The Tribunal remanded the matter to determine abatement eligibility. The Commissioner reduced the liability for the earlier period but confirmed a demand for the latter period due to delayed intimation of option.

2. The appellant argued that composite contracts were excluded from tax liability before 1st June 2007 based on a Supreme Court decision. For the period after 1st June 2007, the appellant contended that the dispute arose due to delayed intimation of the composition scheme option.

3. The Authorized Representative argued that the composition scheme should be strictly construed and failure to furnish the option excludes entitlement to the benefit. However, the Tribunal held that the appellant, as a provider of works contract service, was entitled to the composition scheme to limit tax to the service component of the contract.

4. The Tribunal found that the appellant's failure to intimate the option should not burden them with additional duty as they were eligible for the composition scheme. The decision in Mehta Plast Corporation v. Commissioner of Central Excise supported this view, leading to the disallowance of the differential duty for the period after 1st June 2007.

5. Despite arguments against exclusion from tax for the earlier period, the Tribunal referenced a Supreme Court decision holding that works contracts were taxable only if not in composite form. Consequently, the liability for tax on the appellant's activity before 1st June 2007 did not arise based on the legislative intent.

6. The Tribunal set aside the impugned order, allowing the appeal based on the prevailing law. The judgment clarified the eligibility for abatement, composition scheme, and tax liability on composite contracts, providing relief to the appellant.

Conclusion:
The judgment addressed the issues of abatement eligibility, composition scheme, tax liability on composite contracts, and the impact of delayed intimation of the composition scheme option. It provided a detailed analysis based on legal interpretations and precedents, ultimately allowing the appeal and relieving the appellant of the additional tax burden.