2009 (9) TMI 535 - HC - Service Tax

Stay - demand of Rs. 7.80 crores - Notification No. 1/2006-ST., dated 1-3-2006. - providing completion of finishing services under the category of commercial or industrial construction services respondent has argued that the petitioners are not entitled to abatement of 67% under Notification dated 10-9-2004, as amended vide Notification dated 1-3-2006, because they are providing completion and finishing services exclusively - Tribunal directed the appellant for pre-deposit of Rs. 1 crore. Held that - having regard to the fact that the petitioners have been paying VAT at 33% of the value of work executed (in this manner a sum of Rs. 4,18,33,264/- has already been paid), we are of the opinion that ends of justice would be met if the amount of pre-deposit is reduced from Rs. 1 crore to Rs. 50 lacs.

Summary

Issues:
1. Demand of service tax on completion of finishing services under commercial or industrial construction services.
2. Appeal against the order confirming the service tax demand.
3. Stay application for grant of stay and waiver of pre-deposit of service tax, cess, and penalty.
4. Reduction of the pre-deposit amount based on the substantial value of work towards material and VAT payment.

Analysis:
1. The petitioners received show-cause notices demanding service tax for providing completion of finishing services under commercial or industrial construction services, not entitled to exemption under Notification No. 1/2006-ST. The Commissioner confirmed the demand, leading to appeals before CESTAT challenging the order dated 2-3-2009.

2. The petitioners contended that the nature of their contract involved renovation of old buildings with a minimal service element, arguing that 80% of the work value was attributable to goods. The Tribunal acknowledged the substance in this submission but directed a pre-deposit of Rs. 1 crore pending final hearing of the appeals.

3. The CESTAT passed a common order on the stay application, noting the petitioners' regular payment of service tax at 33% of the work value. Considering the substantial value of work towards material and the VAT payment history, the High Court reduced the pre-deposit amount from Rs. 1 crore to Rs. 50 lacs, citing the judgment in Commissioner, VAT, Trade and Taxes Department v. International Travel House Ltd.

4. The High Court emphasized that the issue of entitlement to abatement under the Notification dated 10-9-2004, as amended, would be examined by the Tribunal during the final appeal hearing. The petitioners were directed to pay the reduced pre-deposit amount within four weeks, leading to the disposal of the writ petition in those terms.