2009 (7) TMI 698 - AT - Service Tax

Stay-Exemption- Notification No. 12/2003-ST dated 20.06.2003- Exemption under Notification No. 12/2003-S.T. was denied by the department. Held that- service tax applicable to services only and not on goods. Held that- Documentary evidence produced ought to have been considered and material component examined. Authority made up its mind to ignore all pleadings. Pre-deposit waived.

Summary

Issues:
Levy of service tax on service provided by works contractors; Eligibility for benefit of Notification No. 12/2003 dated 20-6-2003; Segregation between service and material component in retail invoices; Examination of material adduced before the authority for taxation; Denial of benefit of Notification No. 12/2003 without thorough examination; Direction for pre-deposit of the impugned demand during appeal.

Analysis:
The judgment by the Appellate Tribunal CESTAT, New Delhi involved a dispute regarding the levy of service tax on services provided by works contractors and the eligibility for the benefit of Notification No. 12/2003 dated 20-6-2003. The Authorized Representative for the Appellant argued that the service tax demand of Rs. 1,84,83,805/- was unjust as the appellant was entitled to the benefit of the said notification. It was contended that the authority had disregarded the appellant's plea and failed to consider the sale value of goods used in the work contract, leading to a mechanical order lacking legal sanctity. The appellant's representative emphasized that the authority had ignored relevant details and accounts without proper examination, warranting a reevaluation of the tax liability.

Regarding the segregation between the service and material component in retail invoices, the Joint CDR for the Respondent highlighted that the authority correctly pointed out the lack of segregation in the invoices. The value of material was not separately indicated, leading to the conclusion that service tax should be charged on the whole value rather than just a percentage. The Respondent's representative argued that since there was no evidence of the sale of goods used in the work, the adjudication did not require any interference, supporting the authority's decision.

The Tribunal, after hearing the arguments and examining the record, emphasized the importance of properly determining the value of services for taxation under the Finance Act, 1994. Referring to Notification No. 12/2003 dated 20-6-2003, the Tribunal noted the requirement of documentary proof specifically indicating goods and material for taxation. The Tribunal observed that the authority had failed to thoroughly examine the material adduced before it, leading to a mechanical taxation decision. It was noted that the authority had disregarded the appellant's documentary evidence and failed to consider the material component of the work, resulting in an order raising a substantial demand without proper assessment.

In light of the above observations, the Tribunal granted interim relief to the appellant, as directing pre-deposit at that stage could potentially cause public mischief. Therefore, the Tribunal decided not to direct any pre-deposit during the pendency of the appeal, considering the findings made in the case. The waiver of pre-deposit was directed to provide relief to the appellant during the appeal process, ensuring a fair and just determination of the tax liability.