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2025 (3) TMI 627 - AT - Service TaxCalcutaion of service tax - Service Tax calculated on 20% of the contract value while paying VAT on 80% - in accordance with the amended Rule 2A of the Service Tax (Determination of Value) Rules 2006 or not - proper SCN or not - third SCN was for the period from 01.04.2013 to 31.03.2014 and the subject matter of the present appeal is show cause notice from 01.04.2014 to 31.03.2015 - HELD THAT - The issue is decided in OTIS ELEVATOR COMPANY (INDIA) LTD. VERSUS COMMISSIONER OF SERVICE TAX MUMBAI II 2020 (4) TMI 105 - CESTAT MUMBAI where it was held that in the absence of show cause notice for the period after the substitution of the definition of taxable service in section 65 (105) by section 65B of Finance Act 1994 in 2012-13 and 2013-14 invalidates the demands in the respective impugned orders. Conclusion - By following the precedent decision of this Tribunal in appellants own case wherein demands for the period from 01.07.2012 to 31.03.2014 were set aside the demand raised and confirmed for the period from 01.04.2014 to 31.03.2015 set aside. Appeal allowed.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
ISSUE-WISE DETAILED ANALYSIS 1. Compliance with Rule 2A of Service Tax (Determination of Value) Rules, 2006 Relevant legal framework and precedents: The appellant argued that the amended Rule 2A, effective from 01.07.2012, allowed them to treat the value adopted for VAT purposes as the value of goods transferred in a works contract. This rule was pivotal in determining the taxability of the service portion of works contracts. Court's interpretation and reasoning: The Tribunal examined the appellant's compliance with Rule 2A, noting that the appellant paid VAT on 80% of the contract value and Service Tax on the remaining 20%. The Tribunal found this method aligned with the rule's provisions. Application of law to facts: The appellant's method of tax calculation was deemed consistent with the legal framework, as they correctly applied the rule by segregating the taxable service portion from the goods portion. 2. Validity of Service Tax Demand for 2014-2015 Relevant legal framework and precedents: The Tribunal referenced its previous decision in the appellant's case, which set aside similar demands for earlier periods due to procedural deficiencies and changes in the legal framework post-2012. Court's interpretation and reasoning: The Tribunal noted that the earlier demands were set aside because of the lack of proper show cause notices and changes in the definition of 'taxable service.' The same reasoning was applied to the present demand for 2014-2015. Key evidence and findings: The Tribunal relied on its final order dated 13.03.2020, which addressed similar issues for earlier periods, concluding that the demands were unsustainable due to procedural lapses and legal changes. Application of law to facts: The Tribunal applied the precedent from its previous decision, finding that the procedural and legal deficiencies that invalidated earlier demands also applied to the current demand. 3. Impact of Absence of Proper Show Cause Notice Relevant legal framework and precedents: The absence of a proper show cause notice was a critical factor in the Tribunal's earlier decision to set aside demands for 2012-2013 and 2013-2014. Court's interpretation and reasoning: The Tribunal emphasized that without a proper show cause notice, the demands for those periods were invalidated. This reasoning was extended to the demand for 2014-2015. Conclusions: The Tribunal concluded that the absence of a proper show cause notice rendered the demand for 2014-2015 unsustainable, consistent with its earlier rulings. SIGNIFICANT HOLDINGS The Tribunal's significant holdings include:
Preserved verbatim quotes of crucial legal reasoning: "The law pertaining to taxability of 'service' component of composite 'works contracts' took a long time to attain finality... No such situation appears on record. The demand in the first show cause notice is thus to be limited to the normal period prescribed in section 73 of Finance Act, 1994 and recoveries pertaining to the extended period is set aside." "By following the precedent decision of this Tribunal in appellants own case wherein demands for the period from 01.07.2012 to 31.03.2014 were set aside, we set aside the demand raised and confirmed for the period from 01.04.2014 to 31.03.2015." The Tribunal allowed the appeal, setting aside the impugned Order-In-Original, and concluded that the appellant's tax calculations were in accordance with the law, and the procedural deficiencies invalidated the demand for the period in question.
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