2015 (11) TMI 476 - AT - Service Tax

Commercial or industrial construction service - Works contract service - Payment of tax under Composition scheme without prior opting the scheme - Held that - Appellants were not discharging their service tax liability under the category of works contract. The provisions of Rule 3(3) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 is to the effect that the provider of taxable service who opts to pay service tax under these Rules shall exercise such option in respect of a works contract service provided to payment of service tax in respect of the said works contract and the option so exercised shall be applicable for the entire works contract and shall not be withdrawn until the completion of the said works contract. As such, it is seen from the said Rule that the option has to be exercised by the assessee who wants to discharge the service tax liability under the said category. In the present case, it was never the appellant who opted to pay under works contract but the Revenue required them to pay the tax under the works contract. In such a scenario, the question of assessee exercising any option before discharging the tax under the category of works contract does not arise at all. Such an view adopted by the adjudicating authority is neither appropriate nor legal inasmuch as the same cannot be adopted as a bar to the Revenue s own stand of requiring the appellant to pay tax under the category of works contract. - during the adjudication proceedings, had placed on record a detailed quantification showing the value of the materials used by them and the resultant value of the services. If the adjudicating authority was of the view that the appellant should also place relevant bills/invoices etc. on record, he was within his rights to call for the same instead of confirming the demand on the total value of the works contract, without any notice to the appellant - Impugned order is set aside - Decided in favour of assessee.

Summary

Issues: Taxability under works contract service, application of composition scheme, documentary evidence requirement.

Analysis:

1. Taxability under Works Contract Service:
The appellant, engaged in commercial or industrial construction activities, was initially discharging service tax liability under the construction service category. However, the Revenue later contended that they should have paid tax under the works contract service category from a specific date. The appellant argued that certain contracts for road construction, drainage, and repair activities did not attract service tax liability. They also sought benefits under Rule 2A of the Service Tax (Determination of Value) 2006 and the composition scheme under Rule 3(3) of Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. The adjudicating authority did not accept these contentions, leading to a dispute.

2. Application of Composition Scheme:
The appellant claimed that they were not required to exercise an option for the composition scheme as they were already paying tax under the construction service category. The Tribunal observed that the option under Rule 3(3) of the Composition Scheme Rules must be exercised by the service provider. In this case, the Revenue demanded payment under works contract service, not the appellant opting for it. Therefore, the Tribunal found the adjudicating authority's reasoning incorrect and not legally sound. The Tribunal emphasized that the composition scheme option did not apply in this scenario.

3. Documentary Evidence Requirement:
The adjudicating authority raised concerns about the lack of documentary evidence, such as bills and invoices, regarding the materials used in the services. The appellant argued that they possessed the necessary evidence but were not asked to produce it during the proceedings. The Tribunal held that the authority should have requested the relevant documents instead of confirming the demand solely based on the total value of the works contract. The matter was remanded for a fresh decision, considering the evidence provided by the appellant. The Tribunal clarified that all other issues were open for further examination.

In conclusion, the Tribunal set aside the previous order and directed a reevaluation of the case based on the discussions presented. The decision highlighted the importance of proper application of tax categories, the necessity of exercising options under relevant schemes, and the requirement for documentary evidence to support claims during tax disputes.