2023 (1) TMI 991 - AT - Service Tax

Denial of benefit of Notification No. 12/03-ST dated 20.06.2003 - composite contract service - Inclusion of cost of material and service provider or not - HELD THAT - Since the appellant have declared a material cost and the same was accepted by the service recipient, no doubt can be raised that the material cost declared in the invoice is incorrect unless it is proved contrary by the department. It is also not in dispute that the appellant have provided the composite contract to the service recipient which includes service and material. Therefore, the appellant is entitled for Notification No. 12/03-ST. The appellant have also argued that since they have provided the composite contract i.e. with material and they have discharged the VAT, their service is classifiable under works contract service. Thus, it can be seen that as against the abatement of 67% available under Notification No. 15/04-ST and 01/06-ST, the appellant have taken the abatement ranging from 30% to 48%. Thus, despite the availability of abatement as per the above notification, the appellant have paid the service tax on much higher value, for this reason also the demand is absolutely unsustainable. Appeal allowed.

Issues:
1. Eligibility for exemption under Notification No. 12/03-ST
2. Applicability of composite contract scheme
3. Abatement under Notification No. 15/04-ST and 01/06-ST
4. Classification of service under works contract service
5. Dispute regarding maintenance and repair service exemption
6. Demand for extended period sustainability

Eligibility for Exemption under Notification No. 12/03-ST:
The appellant provided composite contract services in Reliance Township Jamnagar during 2005-2006 to 2008-2009, paying service tax only on the service portion after deducting the value of material supplied under Notification No. 12/03-ST. The department contested this benefit, leading to an appeal. The appellant argued that material cost was clearly declared in invoices, accepted by the service recipient, and identifiable for deduction. The Tribunal agreed, emphasizing that the appellant's compliance with declaring material costs and providing composite contracts justified eligibility for the exemption.

Applicability of Composite Contract Scheme:
The appellant contended that their services fell under the works contract service category, not taxable until 01.06.2007. Even post-taxation, the concessional rate for composite contracts applied, justifying the appellant's payment of service tax on a higher value. The Tribunal concurred, noting the appellant's consistent payment despite deductions for material costs, rendering the demand unsustainable.

Abatement under Notification No. 15/04-ST and 01/06-ST:
The appellant claimed eligibility for abatement under Notification No. 15/04-ST and 01/06-ST, paying service tax on 33% of the gross value. Despite this, they paid tax on a higher value, ranging from 30% to 48%, indicating overpayment. The Tribunal upheld the appellant's argument, deeming the demand unsustainable due to excessive tax payment despite available abatement.

Classification of Service under Works Contract Service:
Given the composite nature of the contracts involving both service and material supply, the appellant's services were rightly classified under works contract service. This classification further supported their eligibility for various exemptions and abatements, strengthening their case against the demand raised by the department.

Dispute Regarding Maintenance and Repair Service Exemption:
The Revenue argued that the services provided were maintenance and repair services, disqualifying the appellant from exemption under Notification No. 12/03-ST. However, the Tribunal found in favor of the appellant, emphasizing the composite nature of the contracts and the identifiable material costs as per the invoices, supporting the appellant's eligibility for the exemption.

Demand for Extended Period Sustainability:
The department raised a demand for the extended period, alleging suppression of facts. The appellant, having discharged service tax in good faith and filing regular returns, contested this demand on limitation grounds. The Tribunal agreed with the appellant, noting their compliance and lack of suppression, rendering the demand for the extended period unsustainable.

In conclusion, the Tribunal upheld the order-in-original, setting aside the order-in-appeal, and allowed the appellant's appeal with consequential relief, emphasizing the appellant's eligibility for exemptions, abatements, and the correct classification of their services under works contract service.

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