2009 (7) TMI 700 - AT - Service Tax

Stay- pre deposit-There cannot be any quarrel that goods involved in execution of works contract shall not be subject matter of service tax while composite works contract involve both service and goods. Demand for pre-deposit made as they are not able to prove quantum of goods involved in a work contract. Held that- in the light of various decisions, direct the appellant to make pre-deposit of Rs. 20 lakhs Rupees Twenty lakhs only) within six weeks from today and make compliance on 28-8-2009. Subject to such compliance, realization of the balance demand shall be stayed till disposal of the appeal.

Summary

Issues:
1. Interpretation of Notification No. 12/03 dated 20-6-03 for deduction of material cost in works contract.
2. Requirement of proving quantum of goods involved in a works contract.
3. Eligibility of completion and finishing services for abatement in service tax.
4. Pre-deposit requirement during pendency of appeal.

Analysis:
1. The appellant claimed a deduction of 60% of the gross value of the contract towards materials involved in the work, excluding the benefit of Notification No. 12/03 dated 20-6-03. The authority below did not consider this claim, leading to a demand for the period from 10-9-2004 to 30th September, 2007. The appellant argued that any demand should be reduced by Rs. 7.00 lakhs. The Tribunal directed a pre-deposit of Rs. 20 lakhs, emphasizing the need for the appellant to prove the quantum of goods involved in the works executed.

2. The Tribunal highlighted the importance of proving the quantum of goods involved in a works contract. The appellant failed to provide the value of goods used in the works, leading to the demand raised against them. The Tribunal stressed the necessity for the appellant to demonstrate the materials involved in the execution of works contracts to determine the tax liability accurately.

3. The eligibility of completion and finishing services for abatement in service tax was discussed. The Tribunal noted that completion and finishing services are not eligible for any abatement, categorizing the appellant as liable for service tax under the Commercial and Industrial Construction service provider category. This decision was based on the failure of the appellant to prove the quantum of material involved in the execution of works contracts.

4. Regarding the pre-deposit requirement during the pendency of the appeal, the Tribunal directed the appellant to make a pre-deposit of Rs. 20 lakhs within six weeks. The Tribunal justified this decision by citing the interest of revenue and the need for the appellant to comply with the pre-deposit following legal precedents. The realization of the balance demand was stayed pending the disposal of the appeal, subject to the appellant's compliance with the pre-deposit directive.