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2020 (12) TMI 282 - AT - Service TaxValuation - Paying service tax at full value instead of at concessional value - whether the assessee is correct in discharging service tax on gross amount charged under Section 67 of the Finance Act, 1994 after availing CENVAT credit on inputs or whether they have to pay service tax under Rule 2A(ii)(B) of Service Tax (Determination of Value) Rules 2006 as assessed by the department? - HELD THAT - The taxable service in the works contract is only the service portion and not the value of the goods involved. Since there is an element of transfer of property of goods involved (sale) while providing the works contract service which may always not be easy to segregate. Service tax (Determination of Value) Rules, 2006 would help to determine the value of service portion in the execution of works contract. On bare perusal of the provisions of law, it would show that section 67 is the charging section which lays down the liability to pay service tax on the consideration received for providing taxable service. Rule 2A provides for a mechanism to chalk out that part of the consideration in a WCS which can be subjected to service tax. - the discharge of service tax liability at full rate by the appellant by applying the provisions of section 67 of the Finance Act, 1994 cannot be called in question by the Revenue The issue with regard to whether assessee is eligible to avail CENVAT credit by discharging service tax under section 67 having been held in favour of the assessee, consequently, the appeal filed by the department alleging wrong availment of credit is without any merits. Time Limitation - HELD THAT - The issue is in the nature of interpretation of provisions of law. The very same issue was under litigation and issue is held in favour of assessee which has been accepted by department. The assessee has indeed discharged service tax as determined under section 67. There is no evidence of deliberate act of intention to evade service tax - the demand raised invoking extended period cannot sustain. The assessee succeeds on the issue of limitation also. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Classification of the activity of retreading of tyres. 2. Eligibility of the assessee to avail CENVAT credit on inputs. 3. Correct method for determining the value of taxable service. 4. Applicability of Rule 2A of Service Tax (Determination of Value) Rules, 2006. 5. Validity of Show Cause Notices issued invoking the extended period of limitation. 6. Revenue loss argument by the department. Issue-wise Detailed Analysis: 1. Classification of the Activity of Retreading of Tyres: The assessee conceded that the activity of retreading of tyres falls under Works Contract Service (WCS) with effect from 1.7.2012. The Hon’ble Supreme Court in Safety Retreading Co. Pvt. Ltd. confirmed that retreading activity is a works contract. Therefore, there is no dispute regarding the classification of the service. 2. Eligibility of the Assessee to Avail CENVAT Credit on Inputs: The assessee utilized inputs such as tread rubber and vulcanizing rubber for retreading tyres and availed CENVAT credit on the duty paid for these inputs. They argued that Section 67 of the Finance Act, 1994 does not prohibit the availment of CENVAT credit. The Tribunal in S.V. Jiwani held that the discharge of service tax liability at full rate by applying Section 67 cannot be questioned by the Revenue. This decision was upheld by the Hon’ble High Court of Bombay and accepted by the Department. Thus, the assessee is eligible to avail CENVAT credit. 3. Correct Method for Determining the Value of Taxable Service: The primary issue was whether the assessee should discharge service tax on the gross amount charged under Section 67 after availing CENVAT credit or under Rule 2A(ii)(B) of Service Tax (Determination of Value) Rules, 2006. Section 67 is the charging section, and Rule 2A provides a mechanism to determine the value of the service portion in a WCS. The Tribunal in S.V. Jiwani and Interarch Building Products Pvt. Ltd. held that the assessee could discharge service tax on the gross amount charged under Section 67, and this decision was accepted by the Department. 4. Applicability of Rule 2A of Service Tax (Determination of Value) Rules, 2006: Rule 2A is subject to Section 67, meaning the assessee can opt to pay service tax under Section 67. The Tribunal in previous cases confirmed that the assessee could discharge service tax liability under Section 67 and avail CENVAT credit, which was upheld by the Hon’ble High Court of Bombay and accepted by the Department. 5. Validity of Show Cause Notices Issued Invoking the Extended Period of Limitation: The issue is one of interpretation of provisions of law. Given the litigation history and the fact that the issue has been held in favor of the assessee and accepted by the Department, the demand raised invoking the extended period of limitation cannot sustain. There was no evidence of deliberate intent to evade service tax. 6. Revenue Loss Argument by the Department: The Department argued that if Rule 2A is applied, the assessee would not be able to avail CENVAT credit, leading to a revenue loss. However, the Tribunal concluded that the assessee can avail CENVAT credit and discharge service tax under Section 67. The argument of revenue loss was not accepted as the assessee had paid a higher amount of tax under Section 67 than they would have under Rule 2A. Conclusion: The appeals filed by the assessees are allowed with consequential relief, and the appeal filed by the Department is dismissed. The cross-objection filed by the assessee is disposed of accordingly. The Tribunal emphasized that judicial discipline requires following the decisions of the Tribunal and the Department's circulars. The assessee succeeded on the issue of limitation as well.
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