2022 (6) TMI 303 - AT - Service Tax

Works Contract service - Continuous Contracts - Benefit of composite scheme for ongoing projects for which service tax paid before 01.06.2017 under Commercial or Industrial Construction Service/ Construction of Complex Service - levy of service tax alongwith interest and penalties - HELD THAT - From Circular No. 128/10/2010-S.T., dated 24-8-2010, in respect of such continuous contracts, it is clear that for the ongoing contracts which were classified where service tax has been paid in the respective specified services before being classifiable under the works contract service , the benefit of composition scheme would not be applicable - In the instant case it is admitted facts that the appellant has paid service tax on ongoing projects under Commercial or Industrial Construction Services and Construction of complex service. Therefore on these 34 ongoing projects the option to pay service tax under the Works Contract (Composition Scheme for Payment of Service tax) Rule, 2007 is not available to the Appellant. In the case of NAGARJUNA CONSTRUCTION COMPANY LTD. VERSUS GOVERNMENT OF INDIA 2010 (6) TMI 91 - ANDHRA PRADESH HIGH COURT which involved identical issue. The Hon ble High Court, while deciding the applicability of Rule 3(3) of the Composition Scheme discussed the case of ongoing works contracts which were earlier being classified under the Residential Complex Services . It is pertinent to mention that in the appellant s own case the Hon ble Gujarat High Court in JMC PROJECTS (INDIA) LTD. VERSUS COMMISSIONER OF SERVICE TAX 2014 (5) TMI 106 - GUJARAT HIGH COURT categorically held that in respect of ongoing projects as on 01.06.2007 if any payment of service tax was made under the respective taxable service head before the said date, qua such contract, composition scheme was not available. Thus, for the ongoing projects as on 1-6-2007, if any payment of service tax was made under the respective taxable services, composition scheme would not be available for the same. Penalties under section 76 and 78 of Finance Act - HELD THAT - As per the settled legal position penalty under section 76 is not tenable when penalty under section 78 is imposed. This issue no longer res integra. Thus, appellant is not liable for penalty under section 76. Accordingly simultaneous penalty imposed under section 76 is set aside. Thus, the demand of service tax confirmed by the adjudicating authority is upheld along with penalty imposed under Section 76/78 and interest under Section 75 - simultaneous penalty imposed under Section 76 is set aside - appeal allowed in part.

Summary

Issues Involved:
1. Admissibility of Composition Scheme for ongoing projects as of 01.06.2007.
2. Reclassification of services under Works Contract Services.
3. Imposition of penalties under Sections 76 and 78 of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Admissibility of Composition Scheme for Ongoing Projects as of 01.06.2007:
The appellant argued that the issue of admissibility of the Composition Scheme for ongoing projects as of 01.06.2007 is settled by several decisions in favor of the assessee. They cited multiple precedents, including Jija Builders Vs CCE, Kolhapur, and Larsen & Toubro 2015(8) TMI 749, asserting that the activity in the nature of a work contract was not taxable before 01.06.2007. Therefore, they contended that the service tax paid under the category of 'Commercial or Industrial Construction Service' before this date should not disqualify them from opting for the Composition Scheme post-01.06.2007. They emphasized that they opted for the Composition Scheme right from 01.06.2007 and fulfilled the conditions to the extent possible.

2. Reclassification of Services under Works Contract Services:
The respondent countered that the appellant was not eligible for the Composition Scheme for ongoing projects where service tax was already paid under 'Commercial or Industrial Construction Services' before 01.06.2007. They referenced CBEC Circular No. 128/10/2010-S.T., which clarified that for contracts where service tax was paid under respective taxable services before 01.06.2007, the Composition Scheme under Works Contract Services was not applicable. The respondent also cited the judgment in Nagarjuna Construction Co. Ltd. Vs. Govt. of India, upheld by the Supreme Court, which supported this interpretation.

3. Imposition of Penalties under Sections 76 and 78 of the Finance Act, 1994:
The appellant argued against the simultaneous imposition of penalties under Sections 76 and 78, asserting that it is legally untenable. The tribunal agreed with this contention, referencing settled legal positions that prohibit simultaneous penalties under these sections.

Judgment:
The tribunal upheld the demand for service tax along with penalties under Section 78 and interest under Section 75. However, it set aside the simultaneous penalty imposed under Section 76. The tribunal concluded that the appellant was not entitled to the Composition Scheme for ongoing projects where service tax was paid under different categories before 01.06.2007, aligning with the CBEC circulars and judicial precedents. The appeals were disposed of accordingly, with the specific order pronounced in the open court on 13.05.2022.