2024 (3) TMI 986 - AT - Service Tax

Works contract service - entitlement to benefit under the Composition Scheme - requirement of first formally informing the department in writing that the appellant is exercising the option to pay service tax under the Composition Scheme - HELD THAT - This issue was examined by a Division Bench of the Tribunal in M/S. ABL INFRASTRUCTURE PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, NASHIK 2015 (2) TMI 801 - CESTAT MUMBAI and in connection with rule 3(3) of the Composition Scheme and it was held that the appellant was executing work in a new contract from 5-6-2007 and was therefore eligible under the category of Works Contract Service. Subsequently, a Division Bench of the Tribunal in CCE, JAIPUR VERSUS M/S ZUBERI ENGINEERING COMPANY AND (VICE-VERSA) 2017 (11) TMI 1334 - CESTAT NEW DELHI , after referring to the decisions of the Tribunal in ABL Infrastructure and Nagarjuna Construction Company, observed when the appellant/assessee did not pay any tax on such works contract service and starts paying tax after availing concession, such payment of tax under the scheme should be construed as exercising the option. The Calcutta High Court in M/S. LARSEN TOUBRO LIMITED VERSUS ASSISTANT COMMISSIONER, SERVICE TAX COMMISSIONERATE, DIVISION-III, KOLKATA OTHERS 2022 (12) TMI 523 - CALCUTTA HIGH COURT also examined the issue and observed that In the absence of statutory format can the department be heard to say that the option should be exercised in a particular fashion and cannot be by conduct, that is by paying the service tax equivalent to 2% of the gross amount charged for the works contract. In view of the aforesaid decisions of the Tribunal and judgment of the Calcutta High Court, it has to be held that payment of service tax contemplated under the Composition Scheme and filing the return would be sufficient compliance of exercising the option under the Composition Scheme. The impugned order dated 29.03.2017 passed by the Commissioner, therefore, cannot be sustained and is set aside - appeal allowed.

Summary

Issues Involved:
1. Requirement of formal intimation to the department for availing the Composition Scheme.
2. Validity of extended period of limitation for demand of service tax.

Summary:

1. Requirement of formal intimation to the department for availing the Composition Scheme:

The appellant, M/s. Zuberi Engineering Company, contested the order confirming the demand of service tax, interest, and penalty, arguing that there was no requirement of separately filing any intimation to the department for availing the Composition Scheme. The appellant asserted that paying service tax at the rate of 4.12% and submitting returns based on the Composition Scheme was sufficient intimation as contemplated under rule 3(3) of the Composition Scheme. The Commissioner, however, did not accept this contention and reduced the demand to Rs. 73,27,280/- for four work orders where the appellant had not exercised the option for the Composition Scheme.

The Tribunal examined whether there is a requirement of first formally informing the department in writing about exercising the option to pay service tax under the Composition Scheme. The Tribunal referred to previous decisions, including ABL Infrastructure Pvt. Ltd. vs. Commissioner of C. Ex., Nashik and the Calcutta High Court in Larsen & Toubro Ltd. vs. Assistant Commissioner, Service Tax Commissionerate, Division-III, Kolkata. It was observed that the fact of paying service tax at the composition rate in the returns filed is enough indication of opting for payment under the Works Contract Composition Scheme, and no specific format or procedure for exercising such option was prescribed.

The Tribunal concluded that payment of service tax under the Composition Scheme and filing the return would be sufficient compliance of exercising the option under the Composition Scheme. Therefore, the impugned order dated 29.03.2017 could not be sustained and was set aside.

2. Validity of extended period of limitation for demand of service tax:

The Commissioner had found that the extended period of limitation was correctly invoked. However, given the Tribunal's decision that the appellant's actions constituted sufficient compliance with the Composition Scheme, the demand based on the extended period of limitation was also set aside.

The appeal was allowed, and the order pronounced on 20.03.2024.