2016 (12) TMI 1061 - AT - Service Tax

Demand - composite scheme - works contract - period of limitation - Held that - the appellant has opted for the composite scheme on 11/03/2010 and thereafter on 22/03/2010 they submitted a letter for withdrawal of the composite scheme. As per these two letters they have discharged the service tax during the period 2010-11 - the show cause notice should have been issued within the normal period of one year as prescribed under section 73(1), whereas the show cause notice for the period 2010-11 was issued on 02/04/2014 i.e. after prescribed limit of one year - there is no suppression of fact on the part of the appellant. Therefore, the demand raised in the show cause notice is clearly time-barred - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Dispute over availing composite scheme for service tax payment
- Validity of withdrawal from composite scheme
- Application of Works Contract Rules 2007
- Time limitation for issuing show cause notice

1. Dispute over availing composite scheme for service tax payment:
The appellant initially opted for the composite scheme for service tax payment but later withdrew the option and paid service tax under normal provisions. The issue arose when a show cause notice demanded service tax based on the composite scheme, arguing that once opted, the appellant could not withdraw. The adjudicating authority and Commissioner upheld the demand, leading to the appeal.

2. Validity of withdrawal from composite scheme:
The appellant argued that the withdrawal from the composite scheme was valid as it was done before the execution of the project and payment of the first installment of service tax. The appellant contended that as per Works Contract Rules 2007, the option had to be exercised before payment of service tax, which was the case here. The appellant also highlighted the timely disclosure of intentions to pay service tax as per their intimation to the department.

3. Application of Works Contract Rules 2007:
The Assistant Commissioner for Revenue argued that as per Rule 3(3) of Works Contract Rules 2007, once the option for payment under the composite scheme is exercised, it cannot be withdrawn until the completion of the contract. Citing a tribunal decision, the Revenue contended that the appellant was bound by the initial choice of the composite scheme.

4. Time limitation for issuing show cause notice:
The crucial aspect of the judgment was the consideration of time limitation for issuing the show cause notice. The appellant successfully argued that the notice issued on 02/04/2014 for the period 2010-11 was beyond the prescribed one-year limit under section 73(1). The Tribunal found that the notice was time-barred, as the appellant had disclosed their intention to pay service tax under normal provisions within the required timeframe.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal solely on the grounds of time limitation, without delving into the merits of the case. The judgment emphasized the importance of adhering to statutory time limits for issuing show cause notices in tax disputes, ensuring fairness and compliance with legal provisions.