2022 (6) TMI 1261 - AT - Service Tax

Computation of Service tax liability - Works Contract - whether the adjustment of excess paid tax in the first half of the Financial Year 2015-16, have been rightly denied? - HELD THAT - It is found that the order of Court below calculating the service tax liability on 100% of the turn-over under works contract service is illegal and irresponsible in view of the mandate of law and more fully mentioned in Notification No.24/2012-ST read with section 65(105)(zzzza) which provides for taxation to service tax only the proportion of service involved in works contract. The appellant are directed to calculate the service tax payable under the Rules and file a calculation sheet before the assessing officer. If any amount is still payable by them they shall pay the same. It is further held that under such circumstances no interest is payable. Penalties imposed are set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues involved: Calculation of correct service tax liability for works contract service, denial of adjustment for excess paid tax in the first half of the Financial Year 2015-16.

Analysis:
The issue in this case revolves around the correct computation of service tax liability for a taxpayer engaged in Civil Construction of buildings under the works contract service. The appellant had paid service tax on 100% of the gross value without availing abatement for the material component during Financial Years 2013-14, 2014-15, and the first half of 2015-16. The Revenue issued a Show Cause Notice for the second half of 2015-16 based on information from the Income Tax Department. The appellant, citing a medical condition, requested a re-calculation allowing abatement and credit for the excess tax paid. However, the Assistant Commissioner calculated the service tax on 100% of the gross value, raising a demand and imposing penalties under sections 78 and 77.

Upon appeal, the Commissioner (Appeals) upheld the adjudication order, leading the appellant to challenge the decision before the Tribunal. The Tribunal, upon review, found the lower court's calculation of service tax liability on 100% of the turnover to be illegal and contrary to the law. The Tribunal highlighted Notification No.24/2012-ST and section 65(105)(zzzza), emphasizing that service tax should only apply to the service component of works contracts. Consequently, the Tribunal allowed the appeal, setting aside the impugned orders.

The Tribunal directed the appellant to calculate the service tax payable under the rules and submit a calculation sheet to the assessing officer. Any remaining payable amount was to be settled by the appellant, with no interest deemed payable under the circumstances. The Tribunal also nullified the penalties imposed, ultimately allowing the appeal and pronouncing the order in the open court.