2019 (4) TMI 1688 - AT - Service Tax

Benefit of composition scheme for work contract service - N/N. 32/2007 dated 22.05.2007 - Whether not filing of prior intimation before availing the benefit of Notification No. 32/2007 dated 22.05.2007 can be considered as a serious violation of service tax law amounting to non-payment of appropriate amount of service tax? - HELD THAT - There is no denying of the fact that the work contract entered by the assessee involves supply of goods as well as service component and therefore, the activity undertaken by them was rightly classifiable under the work contract service. Since N/N. 32/2007 is available to the service providers who are providing services of composite work contract, all the substantial benefit of Notification No. 32/2007 cannot be denied only on the ground that the assessee has not intimated the Department prior to deposit of service tax and filing of service tax return under the composite scheme for work contract. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Whether not filing prior intimation before availing the benefit of Notification No. 32/2007 can be considered a serious violation of service tax law.
2. Whether the appellant's failure to inform the Department before availing the benefit of the composition scheme for work contract service is a ground for denying the reduced rate of service tax.
3. Whether compliance with the notification requirement necessitates prior permission from the department.

Detailed Analysis:
1. The case involved a dispute regarding the appellant's compliance with Notification No. 32/2007 dated 22.05.2007 concerning the payment of service tax under a composition scheme for work contract services. The appellant had paid service tax at a reduced rate of 2.06% without prior intimation to the department. The Department contended that this failure constituted a violation of service tax law, leading to a show cause notice demanding a differential amount of service tax. The issue was whether this omission amounted to a serious violation.

2. The Tribunal analyzed the nature of the appellant's work contract involving both goods and services, falling under the category of work contract service as per the relevant section. The appellant argued that since they were registered with the VAT department for work contract services, the notification only required informing the department, not obtaining prior permission. The key question was whether the failure to inform the department before availing the composition scheme should result in denial of the reduced service tax rate.

3. The Tribunal referred to a previous decision (Final Order No. ST/A/50871/2018-CU(DB) dated 06.03.2018) where a similar issue was addressed. The decision highlighted that the benefit of the composition scheme should not be denied solely based on the failure to file prior intimation. It emphasized that the appellant's payment of service tax at the composition rate indicated their choice, and procedural deficiencies should not negate the substantial benefit of the scheme. The ruling emphasized that compliance with the notification did not require prior permission but only informing the department.

In conclusion, the Tribunal held that the appellant's failure to file prior intimation before availing the benefit of Notification No. 32/2007 did not constitute a serious violation of service tax law. The impugned order-in-appeal was set aside, and the appellant's appeal was allowed based on the precedent that compliance with the notification did not necessitate prior permission but only informing the department.