2018 (5) TMI 556 - AT - Service Tax

Availing benefit of abatement notification with Cenvat Credit - Demand of differential duty - works contract services - paying 33% service tax - whether the respondent herein is required to be saddled with service tax liability in respect of services rendered by them during the period April 2006 to March 2007 or otherwise? - Held that - the Revenue has not effectively contradicted the factual findings of the adjudicating authority who had appreciated the entire case records and held that the proceedings initiated by the show-cause notice needs to be dropped - In view of the fact that the Revenue has not contradicted the factual findings, the impugned order is correct and legal and does not suffer from any infirmity - appeal dismissed - decided against Revenue.

Summary

Issues:
Whether the respondent is liable for service tax on services rendered from April 2006 to March 2007 despite availing benefits under Notification No. 01/2006-ST.

Analysis:
The appeal addressed whether the respondent was liable for service tax on services provided during a specific period. The respondent executed various contracts during this time and was required to discharge service tax liability. The respondent had availed benefits under Notification No. 01/2006-ST by paying service tax at a rate of 33% of the gross amount charged. The issue arose when the Revenue claimed that the respondent, by availing CENVAT credit on input services, was not entitled to the exemption under the said Notification. The show-cause notice demanded payment of differential service tax, interest, and penalty. The respondent contested the notice, arguing that they had availed abatement on individual contracts without using CENVAT credit on inputs or input services.

The adjudicating authority, after due process and considering the respondent's defense, dropped the proceedings initiated by the show-cause notice. The Revenue appealed to the Tribunal, asserting that the respondent could not simultaneously avail exemption under Notification No. 01/2006-ST and credit of duty or service tax on inputs or input services for different contracts with the same recipient. The Tribunal examined the relevant notification, which exempted service tax on commercial or industrial construction services subject to certain conditions, including not availing CENVAT credit on inputs or input services. The Tribunal agreed with the adjudicating authority's findings that the respondent had maintained separate accounts for contracts with or without abatement and had not cross-utilized credits. The Tribunal concluded that the Revenue did not provide evidence contradicting the factual findings, upholding the adjudicating authority's decision to drop the proceedings. The Tribunal rejected the appeal, affirming the correctness and legality of the impugned order.

In summary, the Tribunal ruled that the respondent was not liable for the demanded service tax, interest, or penalty as they had correctly availed benefits under Notification No. 01/2006-ST for contracts without using CENVAT credit on inputs or input services. The Tribunal emphasized the importance of fulfilling conditions stipulated in notifications and upheld the adjudicating authority's decision to drop the proceedings initiated by the show-cause notice.