2024 (10) TMI 1132 - AT - Service Tax

Demand of short paid service tax - managements, maintainenance or repair service shown as works contract service - eligibility for CENVAT Credit - service tax on differential value as per reconciliation of income with the ST-3 return. Service Tax amounting Rs. 91,27,000/- demanded as short paid by the appellants towards the managements, maintainenance or repair service shown as works contract service - HELD THAT - The appellant have paid the VAT on the value of goods used in providing the management, maintenance or repair service. Therefore, if this value of the goods is excluded then on the remaining value the service tax was said to have been paid. It is submission of the appellant that the said value is much below the value at which the appellant have discharged the service tax considering it as works contract service. Therefore, no service tax demand will prima facie exist. However on all the above aspects the final conclusion is subject to verification. Benefit of abatement of 70% of the total amount charged towards works contract service was denied as service tax demanded as short paid on the ground that the appellant have availed the Cenvat credit which is not permissible to the service as works contract service - HELD THAT - The Lower Authority has denied the such benefit only on the ground that the appellant have availed the Cenvat credit. The appellant have claimed that they have reversed the Cenvat credit and if at all there is any short fall, the appellant shall reverse the balance amount, in such situation the appellant is prima facie eligible for benefit of Works Contract Service. Hence, on this count matter needs reconsideration. Service Tax amount of Rs. 16,32,909/- was demanded on the differential value as per reconciliation of income with the ST-3 return - HELD THAT - It is found that as per the reconciliation given by the appellant, the appellant claimed to have discharged the Service Tax correctly and accordingly no differential demand of service tax arise. However, the correctness of the calculation needs to be verified by the department. The entire matter needs to be reconsidered - the impugned order is set aside - appeal allowed by way of remand.

Summary

Issues:
1. Demand of service tax for various reasons including short payment and denial of abatement.
2. Interpretation of works contract service and eligibility for concessional rate of service tax.
3. Reconciliation of income with ST-3 return and demand based on differential value.

Analysis:

Issue 1: Demand of service tax
The appellant contested the demand of Rs. 91,27,000 for the period prior to 30.06.2012, arguing that management, maintenance, or repair service was covered under works contract service during that period. They also claimed eligibility for a 70% abatement under Notification No. 12/2003-ST. The appellant presented a certificate from the Commercial Tax Officer certifying the value of goods used in the service provision. The Tribunal did not conclusively determine if the service fell under works contract service but considered the appellant's alternate argument for the benefit of the notification. The Tribunal emphasized the need for verification before reaching a final conclusion.

Issue 2: Interpretation of works contract service
Regarding the demand of Rs. 89,81,711 for the period post 30.06.2012, the appellant asserted that the maintenance, management, or repair activity was included in Works Contract Service. They contended that the denial of this benefit was based on availing Cenvat credit, which they claimed to have reversed. The Tribunal found merit in the appellant's argument and suggested a reconsideration of the matter by the Lower Authority to determine eligibility for the benefit of Works Contract Service.

Issue 3: Reconciliation of income and demand based on differential value
The demand of Rs. 16,32,909 was challenged by the appellant, claiming to have correctly discharged the service tax as per reconciliation. The Tribunal acknowledged the appellant's assertion but highlighted the necessity for the department to verify the calculation's accuracy. Consequently, the Tribunal concluded that the entire matter required reconsideration and set aside the impugned order, remanding the case to the adjudicating authority for a fresh decision.

In conclusion, the Tribunal directed a de novo order by the adjudicating authority, emphasizing the need for thorough verification and reconsideration of the issues raised by the appellant. The judgment highlighted the importance of proper interpretation of works contract service provisions and the necessity for accurate reconciliation of income for service tax assessment.