2023 (9) TMI 79 - AT - Service Tax

Demand of Service tax - valuation adopted by the appellant in accordance with Rule 2A of the Service Tax (Determination of Value) Rules, 2006 or not - HELD THAT - The undisputed fact is that the appellant provided works contract; it also discharged VAT at a certain percentage, admittedly as prescribed by the relevant States. In order to ascertain the correctness of the appellant's claim, it appears that even the Chief Commissioner authorised a cost accountant to verify the same - It is found from the record that in the appellant s own case JOHNSON LIFTS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE (ST) CHENNAI-IV 2018 (6) TMI 384 - CESTAT CHENNAI , although for a different period, even the original authority had accepted the value of service portion as 15% only, which the appellant claimed to have followed in the year under challenge. In its decision in the case of SAFETY RETREADING COMPANY (P) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, SALEM, M/S TYRESOLES INDIA PRIVATE LMITED VERSUS THE COMMISSIONER OF CENTRAL EXCISE, GOA AND M/S LAXMI TYRES VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE 2017 (1) TMI 1110 - SUPREME COURT , the Hon ble Apex Court has held The finding of the Appellate Tribunal that it is the entire of the gross value of the service rendered that is liable to service tax, in our considered view, does not lay down the correct proposition of law which, according to us, is that an assessee is liable to pay tax only on the service component which under the State Act has been quantified at 30%. The impugned demand cannot sustain, for which reason the impugned orders deserve to be set aside - Appeal allowed.

Summary

Issues Involved:
The issues involved in the judgment are:
1. Whether the Revenue was justified in demanding Service Tax based on the valuation adopted by the appellant not being in accordance with Rule 2A of the Service Tax (Determination of Value) Rules, 2006?

Summary of the judgment:
The appellant provided works contract services involving manufacture, erection, commissioning, and installation of lifts. The Revenue raised concerns regarding the payment of Service Tax on only 15% of the total value of works contract, with the appellant paying VAT on the remaining 85%. Show Cause Notices were issued proposing recovery of Service Tax for specific periods. The appellant contested the allegations, citing compliance with State VAT laws. The matter was brought before the Tribunal, where the appellant argued that the demand for Service Tax was not justified, referencing relevant legal precedents and previous Tribunal orders.

The Tribunal examined the case and considered the reports of a cost accountant verifying the payment of VAT and Service Tax by the appellant. The Tribunal noted that the appellant had followed the prescribed percentages for VAT payment in different States. Referring to the decision of the Hon'ble Supreme Court in a similar case, the Tribunal emphasized that Service Tax should be levied only on the service component of works contracts, as per State laws. Citing previous Tribunal orders and legal principles, the Tribunal concluded that the demand for Service Tax was not sustainable. Therefore, the impugned orders were set aside, and the appeals were allowed with consequential benefits, if any, as per law.

This comprehensive summary covers the issues involved, the background of the case, arguments presented by both parties, legal references, and the final decision of the Tribunal.