2018 (9) TMI 1669 - AT - Service Tax

Valuation - Erection, Commissioning and Installation service - allegation is that the appellant has paid the service tax only on the civil construction part of the contract and that has artificially bifurcated the turnkey project into three separate contracts - Held that - It is very much clear from the facts that the appellants had entered into different contracts with separate agencies - the issue decided in appellant own case 2018 (2) TMI 148 - CESTAT CHENNAI , where it was held that the appellant will be entitled to the benefit of abatement under Sl.No. 7 of the Notification ibid - the said allegation or the demand on this count cannot sustain and requires to be set aside. Composition Scheme - procedural lapse - allegation is that the appellant cannot opt to pay service tax under the composition scheme for the reason that they have failed to file intimation prior to payment of service tax under the composition scheme for works contract service - Held that - In Vaishno Associates 2018 (3) TMI 417 - CESTAT NEW DELHI , the Tribunal has considered the said issue and held that it is only a procedural one and that the substantial benefit cannot be denied for procedural lapse - demand do not sustain. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Allegation of short-payment of service tax under works contract service and failure to avail composite scheme.

Analysis:

Issue 1: Short-payment of Service Tax
The appellant, engaged in manufacturing transformers and electrical switchgear, was paying service tax at 4% for works contract service without availing the composition scheme. The department alleged short-payment of service tax, grouping separate contracts as one for tax liability. The adjudicating authority confirmed the demand, but the appellant argued that contracts should be assessed independently. Citing a previous case, the Tribunal held that contracts for supply, erection, and civil works should be assessed separately since they were executed separately. The appellant was entitled to abatement under specific notification, and the demand on this count was set aside.

Issue 2: Failure to Avail Composite Scheme
The second allegation was that the appellant failed to intimate the department before paying service tax under the composition scheme for works contract service. The appellant argued it was a procedural lapse, citing a Tribunal decision that substantial benefits cannot be denied for procedural issues. Following this precedent, the Tribunal held that the demand on this count also could not be sustained. Consequently, the impugned orders were set aside, and the appeals were allowed with any consequential relief.

This judgment clarifies the proper assessment of service tax liabilities under works contract services, emphasizing the need to consider contracts separately and the entitlement to abatement under specific notifications. It also highlights that procedural lapses should not result in the denial of substantial benefits under the composition scheme.