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2018 (1) TMI 491 - AT - Service TaxCENVAT credit - Valuation - Classification of services - business of manufacture, supply and erection at site of pre-fabricated/pre-engineered steel buildings and parts thereof at its three manufacturing units - classified under Works Contract Service or under Commercial or Industrial Construction Service? - the entire case of Revenue is based on the provisions under Rule 2A of Service Tax (Determination of Value) Rules, 2006 and Composition Scheme in respect of Works Contract Service. It is the contention of the Revenue that after 01.06.2007, the services of the appellant were appropriately classifiable under works contract service only in terms of Section 65 (105) (zzzza) of the Finance Act, 1994 and that the appellant had only two options for valuation of its service and that is, either Rule 2A of Valuation Rules, 2006 of under the composition Scheme. Held that - the benefit of Cenvat credit on inputs cannot be denied to the appellants in the absence of any specific bar or prohibition in the Cenvat Credit Rules, 2004 or the Finance Act, 1994 or the rules made there under. We do not find any such restriction or prohibition nor the ld. D.R. has been able to show any such restriction to us. We find that in the present case, assessments were done by the appellant in accordance with the provisions. The issue in hand is squarely covered by the decision in the case of M/s SV Jiwani Versus CCE & ST, Vapi 2014 (3) TMI 454 - CESTAT AHMEDABAD , where it was held that it is undisputed that the appellant had provided output services which covered by works contract for setting up of plant, it has to be held that cenvat credit availed by the appellant is in consonance with the provisions of the CCR 2004. Appeal allowed.
Issues Involved:
1. Classification of service under Works Contract Service versus Commercial or Industrial Construction Service. 2. Admissibility of Cenvat credit on inputs. 3. Applicability of Rule 2A of Service Tax (Determination of Value) Rules, 2006 and Composition Scheme. 4. Demand for short-paid Service Tax and excess collection of Service Tax. 5. Imposition of penalties and interest. Issue-wise Detailed Analysis: 1. Classification of Service: The Revenue contended that the services provided by the appellant should be classified under Works Contract Service instead of Commercial or Industrial Construction Service. The Tribunal observed that even if the services are considered under Works Contract Service post 01.06.2007, the further claims of the Revenue regarding valuation and non-admissibility of Cenvat credit have no merit. The Tribunal emphasized that the Composition Scheme is optional, and the provisions of Rule 2A are subject to Section 67 of the Finance Act, 1994. 2. Admissibility of Cenvat Credit on Inputs: The Original Authority disallowed Cenvat credit on inputs based on the classification under Works Contract Service. The Tribunal found that the appellant was entitled to Cenvat credit on inputs as there was no violation of Section 67 of the Finance Act, 1994. The Tribunal noted that the assessments were done in accordance with Section 67, and the benefit of Cenvat credit could not be denied in the absence of any specific prohibition in the Cenvat Credit Rules, 2004 or the Finance Act, 1994. 3. Applicability of Rule 2A and Composition Scheme: The Revenue argued that the appellant should have followed Rule 2A or the Composition Scheme for valuation, which do not allow Cenvat credit on inputs. The Tribunal clarified that Rule 2A and the Composition Scheme are options and not mandatory. The Tribunal highlighted that the provisions of Rule 2A are subject to Section 67, and since there was no allegation of violation of Section 67, the appellants were not bound to follow Rule 2A or the Composition Scheme. 4. Demand for Short-paid Service Tax and Excess Collection: The Revenue demanded recovery of short-paid Service Tax and excess Service Tax collected. The Tribunal concluded that once Cenvat credit on inputs is admissible, the demand for short-paid Service Tax and excess collection under Section 73A of the Finance Act, 1994 does not survive. The Tribunal found that the entire demand was based on the incorrect presumption that Cenvat credit on inputs was inadmissible. 5. Imposition of Penalties and Interest: The Original Authority imposed penalties and interest based on the alleged inadmissibility of Cenvat credit and short payment of Service Tax. The Tribunal set aside the penalties and interest, stating that the demands were unsustainable as the appellant was entitled to Cenvat credit on inputs, and there was no short payment of Service Tax. Conclusion: The Tribunal allowed the appeal, setting aside the impugned Order-in-Original dated 31/03/2017. The Tribunal held that the appellant was entitled to Cenvat credit on inputs, and the demands for short-paid Service Tax and excess collection were unsustainable. The Tribunal did not address the issues of limitation and quantification, leaving them open. The appeal was disposed of with consequential relief to the appellants.
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