2023 (9) TMI 356 - HC - Central Excise

Rate of abatement - Works Contract - Violation of principles of natural justice - ex-parte order - petitioner has not filed any reply and thereby has not responded to the notice - Inspite of three opportunities, the petitioner did not appear before the Authorities - HELD THAT - Admittedly, the petitioner has engaged in works contract. The respondent has also recorded that the petitioner is engaging in works contract especially in relation to the construction of check dams, repairing of irrigation tanks, construction of Government schools and Government Polytechnic, etc. - As per Rule 2(ii)(A) of Service Tax (Determination of Value) Rules, 2006, if the petitioner is considered as individual, the respondent ought to impose only 40%. Hence the respondent has not granted the abatement of 60% provided for the work contract. If the said rule is applied then the respondent is not empowered to impose 100% tax. If the respondents have considered the petitioner as registered under the Company s Act then the petitioner is entitled to pay only 50% as per the S.No.9 of the Notification No. 30/2012-ST dated 20.06.2012. Under S.No.9 it states that in respect of service provided or agreed to be provided in service portion in execution of works contract , then 50% ought to be paid by the person providing service and 50% ought to be paid by the person receiving the service . Since the respondent has imposed 100% service without invoking the Rule and Notification, this Court is inclined to interfere with the impugned Assessment order, dated 22.03.2023. This Court is inclined to quash the assessment order. The petitioner is directed to submit his reply, within a period of two weeks, from the date of receipt of a copy of the order. Thereafter, the respondents shall grant personal hearing - Petition allowed.

Summary

Issues involved: Challenge to Assessment order based on works contract and service tax calculation.

Summary:

Issue 1: Failure to respond to notices and Assessment order based on works contract
The petitioner challenged the Assessment order dated 22.03.2023, citing that despite being engaged in works contract, the respondent did not grant the abatement of 60% as provided under Rule 2(ii)(A) of Service Tax (Determination of Value) Rules, 2006. The respondent imposed 100% tax without considering the relevant provisions for works contract execution.

Issue 2: Applicability of service tax based on status under Company's Act
The petitioner contended that if considered as registered under the Company's Act, only 50% tax should be imposed as per S.No.9 of Notification No. 30/2012-ST dated 20.06.2012. The respondent's imposition of 100% tax without invoking the relevant Rule and Notification warranted interference by the Court.

Judgment:
The Court, after considering the arguments, quashed the Assessment order and directed the petitioner to submit a reply within two weeks. The respondents were instructed to conduct a personal hearing without adjournments, completing the assessment proceedings within eight weeks. The Writ Petition was allowed with no costs, and the connected miscellaneous petition was closed.