2018 (1) TMI 1133 - AT - Service Tax

Valuation - Erection, Commissioning or Installation Service - Since the appellant did not include the value of free supply material in the gross value charged by it, the benefit of abetment/ composition scheme was denied by the Department - Held that - the contract executed by the appellant involved supply of material as well as for provision of labour. Thus, the activities undertaken by the appellant should fall under the preview of works contract for levy of Service Tax. The composition scheme should be available to the appellant and cannot be denied on the ground that it did not specifically exercise the option regarding opting for the works contract service - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of works contract service and composition scheme eligibility.

Analysis:
The appeal challenged an order passed by the Commissioner (Appeals) regarding the classification of services provided by the appellant and the denial of the composition scheme benefit. The appellant undertook activities for M/s. Hindustan Petroleum Corporation, including Civil Construction, Site preparation, Road work, Pump installation, Piping, Soil Work, etc. The Department considered these activities as falling under taxable Erection, Commissioning, or Installation Service due to the exclusion of the value of free supply material from the gross value charged. Consequently, a service tax, interest, and penalty were imposed on the appellant. The appellant argued that the services were composite, involving both material supply and labor provision, and should be classified under works contract service. The appellant cited precedents to support their claim for composition scheme eligibility.

During the proceedings, the Department reiterated the findings of the impugned order. The Tribunal examined the case records and noted that the Commissioner (Appeals) had acknowledged the supply of material and labor by the appellant but classified the services under Erection, Commissioning, and Installation service, denying the composition scheme benefit. The Tribunal disagreed with this classification, stating that the activities should be considered works contract services for Service Tax purposes. The Tribunal emphasized that the composition scheme could not be denied based on the appellant not explicitly opting for works contract service before paying Service Tax. Citing previous judgments, the Tribunal held that procedural deficiencies should not hinder substantial benefits, especially when no specific format for opting for the scheme was prescribed.

Ultimately, the Tribunal found no merit in the impugned order's denial of the composition scheme benefit to the appellant. Consequently, the Tribunal set aside the order and ruled in favor of the appellant, allowing the appeal.