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2024 (6) TMI 303 - AT - Service TaxClassification of services - construction services - works contract services or not - composite services - quantification of demand - invocation of extended period of limitation. Classification of services - HELD THAT - The Ld. Counsel does not dispute that the works executed were composite in nature involving both use of materials and rendition of service. The services are therefore correctly classifiable under Works Contract Service. The issue of classification is not disputed by the appellant. Extended period of limitation - HELD THAT - The appellant has paid service tax on 33% of the consideration received. It is indeed correct that the issue of classification of construction services was doubtful and the issue of classification of services being interpretational in nature, the demand raised for the extended period cannot sustain and requires to be set aside. The department has not brought out any positive act of suppression on the part of the appellant. The entire figures have been taken from the accounts of the appellant and the Department reclassified the services under WCS. The appellant has correctly discharged service tax and the allegation is only with regard to the classification of the construction services - The demand for the period April 2012 to June 2012 would fall within the normal period and the appellant is required to pay service tax for this period under the category of WCS. Benefit of composition scheme denied - HELD THAT - The demand raised by the department @ 12% denying abatement and composition scheme is not sustainable. The reason for denying the benefit of composition scheme is that the appellant has not obtained permission from the Department for applying composition scheme. When the appellant has classified the services under construction of Complex Services, there is no situation that appellant would apply for permission to adopt composition scheme - The Tribunal in the case of ABL Infrastructure Pvt. Ltd. Vs CCE Nashik 2015 (2) TMI 801 - CESTAT MUMBAI has held that even if the assessee has not obtained permission from the Department for opting the composition scheme, the benefit of the said scheme has to be extended to the assessee. Thus, the quantification of service tax has to be done applying the composition scheme. The details of the service tax that has to be paid by applying the composition scheme is calculated by the appellant. It is noted that after deducting the amount of service tax that has already been paid by appellant, the amount of service tax payable for the normal period would be Rs.5,759/-. The appellant has to discharge this differential amount of service tax along with interest. Penalties for the normal period are set aside for the same reason which is discussed for invocation of extended period. Appeal allowed in part.
Issues Involved:
1. Classification of service under Works Contract Service (WCS) for the disputed period. 2. Quantification of service tax demand. 3. Invocation of the extended period for demand. Comprehensive Issue-Wise Analysis: Issue 1: Classification of Service under WCS The appellant, a proprietary concern, provided construction services and discharged service tax under Construction of Complex Service (CCS) by claiming 67% abatement as per Notification No.1/2006-ST. The department reclassified the services under WCS, arguing that the constructions were composite in nature involving transfer of property in goods. The appellant did not dispute this reclassification, acknowledging that composite contracts involving transfer of property in goods should be classified under WCS as per the Supreme Court's decision in CCE Vs L & T Ltd. 2015 (39) STR 913 SC. Thus, the classification under WCS was accepted as correct. Issue 2: Quantification of Service Tax Demand The appellant argued that the department's quantification of service tax was erroneous as it did not account for the value of materials, demanding tax on the entire value received. The department's method excluded only the land value, leading to an incorrect demand on both service and goods value. The appellant contended that the benefit of either Rule 2A of the Service Tax (Determination of Value) Rules, 2006, or the composition scheme should be extended to avoid taxing the transfer of property in goods, which is constitutionally impermissible. The Tribunal agreed, citing cases like Bridge & Roof Co. (I) Ltd. Vs CCE and ABL Infrastructure Pvt. Ltd. Vs CCE, which held that the composition scheme's benefits should be extended even if not initially opted for. The Tribunal concluded that the quantification should be done under the composition scheme, resulting in a differential service tax liability of Rs.5,759 for the normal period. Issue 3: Invocation of Extended Period The appellant challenged the extended period's invocation, arguing that the classification issue was under significant confusion until the Supreme Court's decision in the L & T case. The appellant had classified services under CCS based on a bona fide belief and had disclosed all necessary details in their ST-3 returns. The Tribunal found no evidence of fraud, suppression of facts, or willful misstatement by the appellant. The department's reclassification was based on the appellant's disclosed figures, and there was no positive act of suppression. Thus, the demand for the extended period was deemed unsustainable and was set aside. Conclusion: The Tribunal modified the impugned order, confirming the service tax for the normal period while setting aside the demand for the extended period. The quantification of service tax was directed to be done under the composition scheme, and the penalties were entirely set aside. The appeal was partly allowed with consequential reliefs as applicable.
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