2014 (2) TMI 1082 - AT - Service Tax

Waiver of predeposit - valuation - Civil construction - included the value of goods/services involved in any other contract - Held that - it appears from the impugned order that appellant has paid VAT on the material of civil construction. As far as the claim of the applicant to avail option under Rule 3(1) of the Rules 2007 is concerned, prima facie we find force in the submission of Ld. AR. However, we find that the applicant have already paid 4% in terms of rule 3(1) of the Rules, 2007. In view of that, the applicant is directed to deposit 20% of the tax demanded in both the appeals within 6 weeks. Upon such deposit, predeposit of the balance amounts of tax, penalties along with interest is waived and recovery is stayed till pendency of the appeals - Conditional stay granted.

Summary

Issues involved:
1. Waiver of predeposit of service tax along with interest and penalty in two appeals.
2. Dispute regarding payment of tax under Works Contract Rules 2007 for civil works.
3. Determination of whether the contract is a composite contract involving design, supply, erection, commissioning, and installation.
4. Eligibility for abatement under Rule 3(1) of the Service Tax (Determination of Value) Rules 2007.
5. Permissibility of bifurcating composite service contract under Rule 3(1) of Rules 2007.

Analysis:

1. The appellant filed applications for the waiver of predeposit of service tax amounts in two appeals. The total amount in question was Rs.1,12,75,883 and Rs.2,24,94,063 respectively, along with interest and an equal amount of penalty in both cases. Both appeals were considered together for disposal.

2. The appellant argued that they had been awarded 18 contracts for various projects, specifically focusing on civil works. They contended that they had paid tax at applicable rates for services like erection and commissioning but had paid tax at a lower rate of 4% for civil construction under the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007. The appellant maintained that they had paid VAT for materials involved in the civil works and had correctly paid taxes under the Works Contract Rules 2007.

3. The Revenue's Authorized Representative argued that the contract was a composite one involving design, supply, erection, commissioning, and installation, and thus, the civil work was part of a composite contract. Referring to the show cause notice, it was highlighted that the appellant had opted for a composite scheme under Rule 3(1) of the Service Tax (Determination of Value) Rules 2007. The Revenue contended that the appellant was not eligible for abatement based on a Supreme Court judgment and that bifurcating the composite service contract was impermissible under Rule 3(1) of the Rules 2007.

4. After considering both sides and reviewing the records, the Tribunal found that the appellant had paid VAT on the material used in civil construction. While acknowledging the Revenue's argument regarding the composite nature of the contract and the eligibility for abatement, the Tribunal noted that the appellant had already paid 4% tax as per Rule 3(1) of the Rules 2007. Consequently, the Tribunal directed the appellant to deposit 20% of the tax demanded in both appeals within six weeks. Upon this deposit, the predeposit of the remaining tax amounts, penalties, and interest was waived, and recovery was stayed pending the appeals.

This detailed analysis of the judgment covers the issues of waiver of predeposit, dispute over tax payment for civil works, determination of a composite contract, eligibility for abatement, and permissibility of bifurcating the service contract under the relevant rules.