2020 (3) TMI 201 - AT - Service Tax

Valuation - demand of service tax on the gross turnover without giving any allowance for the material utilised in execution of the contract - period April, 2008 to March, 2012 - extended period of limitation - penalty u/s 76, 77 and 78 of FA - Cum-tax benefit - HELD THAT - It is evident that the appellant have done works contract wherein they have executing the work alongwith material. Thus, the gross amount paid to them by the principal, includes the value of materials. Further, the appellant are also assessed to sales tax and they have paid VAT on the value of the materials which are to be sold to the principal in the execution of work contract. In the impugned order, mistake in calculation of tax dues has already appreciated by the Commissioner (Appeals). Accordingly, the impugned order is set aside and remanded to the original adjudicating authority for re-determination of tax liability after allowing deduction for the material component, which is verifiable from the sales tax assessment order and also from the other records. Cum tax benefit - HELD THAT - The appellant shall be entitled to cum tax benefit as already held by the Commissioner (Appeals) and also entitled to turnover . Imposition of penalty u/s 76, 77 and 78 of FA - HELD THAT - In absence of any malafide no penalty is exigible under Section 76 and 78, as there is no case of deliberate default made out in the show cause notice - The penalty under Section 77 shall also stand reduced in terms of the re-quantification of the demand. Appeal allowed by way of remand.

Summary

Issues:
- Service tax demand on gross turnover without allowance for material utilized in contract
- Show cause notice invoking extended period of limitation
- Assessment of tax liability with deduction for material component
- Consideration of sales tax assessment orders
- Penalty under Sections 76, 77, and 78

Analysis:
The appellant, a contractor engaged in work for a specific project, contested a service tax demand on the gross turnover without considering the material utilized in the contract. The Commissioner (Appeals) noted the appellant's VAT registration and remanded the matter for re-quantification of the tax liability, allowing deduction for the material component. The Tribunal observed that the appellant executed a works contract involving both work and material, as evident from the work order. The Tribunal emphasized the need to consider the material component, which the appellant paid VAT on, in determining the tax liability. The impugned order was set aside, and the matter was remanded for re-determination of tax liability after deducting the material component, as verifiable from sales tax assessment orders and other records. The appellant was granted cum tax benefit and turnover entitlement, with no penalty imposed under Sections 76 and 78 due to the absence of deliberate default as per the show cause notice. The penalty under Section 77 was also reduced in line with the re-quantification of the demand. Thus, the appeal was allowed by way of remand, ensuring a fair assessment of the tax liability considering the material component and sales tax assessment orders.