2018 (5) TMI 678 - AT - Service Tax

Works Contract Service - original works - service tax liability @40% or otherwise - work relating to laying of underground cables under or alongside the road - Abatement - Held that - the learned Commissioner have rightly allowed deduction for work relating to laying of underground cables under or alongside the road, following N/N. 123/5/2010-TRU dated 24 May, 2010. The learned Commissioner have erred in not allowing the abatement is provided in Rule 2A Clause (ii) (A) which provides where the value has not been determined under Clause (i), the person liable to pay tax on the taxable service involved in the execution of the works contract shall determine the service tax payable in the following manner (A) In case of works contract entered into for execution of original works, service tax shall be payable on 40% of the total amount charged for the works contract. There is failure on the part of learned Commissioner to allow the admissible abatement under the Service Tax (Determination of Value) Amendment Rules, 2012, read with the Service Tax (Determination of Value) Rules, 2006. The show cause notice is not maintainable and misconceived - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Demand of Service Tax under 'works contract' category.
2. Disallowance of abatement leading to increased tax liability.
3. Applicability of Notification No. 123/5/2010-TRU dated 24 May, 2010.

Analysis:
1. The appeals arose from an Order-in-Original confirming a demand of Service Tax along with penalties. The appellant, engaged in works contract services, argued against the demand based on the taxable nature of gross receipts. The Commissioner assessed the appellant at a reduced amount, but the appellant contended that abatement should have been allowed. The appellant calculated the service tax liability differently, showing no discrepancy in tax payment.

2. The Revenue supported the impugned order but raised concerns about dropping the demand for service tax on activities pre-July 2012. The Tribunal found no merit in the Revenue's appeal, upholding the deduction for work related to laying underground cables. However, regarding the appellant's appeal, it was noted that the Commissioner erred in not allowing abatement as per the relevant rules. The Tribunal found failure to consider the admissible abatement, leading to a conclusion that the show cause notice was misconceived. Consequently, the impugned order was set aside, and the appellant's appeal was allowed.

3. The Tribunal's decision highlighted the importance of adhering to the abatement rules under the Service Tax (Determination of Value) Amendment Rules, 2012. By considering the appellant's calculations and the tax already paid and declared, the Tribunal determined that the show cause notice was not maintainable. As a result, the appellant's appeal was allowed, and they were entitled to consequential benefits as per the law. The judgment emphasized the necessity of correctly applying abatement provisions in determining service tax liability.