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TMI Blog2009 (9) TMI 342X X X X Extracts X X X X X X X X Extracts X X X X ..... ale and therefore it is not entitled to the benefit of the Notification. The Commissioner confirmed the said demand on the ground that assessee had not produced documents to evidence sale of materials for which exemption was claimed. Held that- the decision of the commissioner to collect service tax on the value on which the assessee had already paid State Vat was contrary to the principal of fiscal federalism adopted in the constitution. Thus the demand is not sustainable. Accordingly, the impugned order was vacated and appeal filed by the assesese was allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... 30 per cent of the value. Under show-cause notice C.No. V/15/32/2007 LTU ADJN, dated 12-10-2007, it was proposed to demand service tax of Rs. 48,48,06,462 being the differential service tax on account of the wrong availment of Notification No. 12/2003 on the ground that SDL had consumed materials used in the provision of services and had not sold them to the customer; such consumption had not amounted to sale. The appellant was also not entitled to the benefit of Notification No. 1/2006-ST, dated 1-3-2006. The appellant resisted the proposal in reply dated 17-3-2008. They availed the opportunity to explain their case before the Commissioner personally on 17-3-2008. The Commissioner rejected the submissions of SDL and confirmed the demand of service tax of Rs. 69,28,94,102. The Commissioner found that SDL had paid service tax up to 31-3-2006 availing 67 per cent abatement of the gross amount charged as provided under Notification No. 15/2004-ST, dated 10-9-2004 without availing credit of duty paid on inputs or capital goods. From 1-4-2006, the assessee switched to Notification No. 12/2003-ST, and claimed deduction towards the value of goods and materials following the formula presc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that ATM related services had been introduced for the levy of service tax only with effect from 1-5-2006 and indivisible works contract like the ones involved in that case came to be chargeable to service tax only with effect from 1-6-2007. Thus the subject-matter of that case had not attracted service tax for any service prior to 1-5-2006. In Air Liquide Engg. India (P.) Ltd. v. CCE [2008] 13 STT 78 (Bang. - CESTAT), eight contracts considered by the Tribunal were actually works contract on turnkey basis. Works contract came into service tax net only with effect from 1-6-2007. Therefore for a period from 1-6-2007, works contract could not be covered under the 'consulting engineering service'. Several other case laws holding the same view also were cited. It was a consistently followed position that services brought under service tax through new service definition were not taxable under pre-existing categories of services. This was the ratio of the decision in Glaxo Smithkline Pharmaceuticals Ltd. 2005 (188) ELT 171/1 STT 37 (Mum. - CESTAT). It is submitted that vide Circular F.No. V/DGST/22 Audit/Misc./1/2004/Mumbai, dated 16-2-2006, CBEC clarified that if construction was und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea Mobile Communications Ltd. v. CCE [2006] 5 STT 352 (Bang. - CESTAT) the Tribunal had held as follows : "On a careful consideration, we notice that the assessee is not contesting the levy of sales tax. They have already paid the sales tax. It follows that service tax is not leviable on the item on which sales tax has been collected. . . ." (p. 353) In the light of these authorities, it is claimed that the value of the goods and materials sold by the service provider during the course of provision of service could not form part of the value of taxable service. The department had clarified the scope of Notification No. 12/2003-ST in its letter dated 7-4-2004 addressed to M/s. Punjab Color Lab Association, Jalandar as under : ". . . the exemption in respect of input material consumed/sold by the service provider to the service recipient while providing the taxable service is available. However, the exemption is available only if the service provider maintains the records showing the material consumed/sold while providing the taxable service. The value of such material should also be indicated on the bill/invoice issued in respect of the taxable service provided.". The Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) is correct and legal in the light of the Apex Court's decision in BSNL's case (supra). Hence, we allow the appeals with consequential relief if any. We also observe that the Circular dated 3-3-2006 is not in accordance with the ratio of the decision of the Apex Court in the BSNL's case (supra)" (p. 117) (d) As regards denial of exemption extended under Notification No. 1/2006-ST allowing 67 per cent of the gross amount charged for commercial or industrial construction services or construction of complex service, it is claimed that the assessee had the option to avail either exemption under Notification No. 12/2003-ST or Notification No. 1/06-ST. SDL had opted to avail benefit of Notification No. 12/2003-ST. They had discharged the legitimate liability. (e) The appellants submitted that the impugned order denied CENVAT credit available on input services, and capital goods in computing the liability. Moreover incorrect rate of service tax was applied in computing the liability. Since the service tax liability itself could not be sustained, the liability towards interest and penalty also was not sustainable. Relying on the judgment of the Apex Court in the case of Hindustan Steel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluded in the taxable value for levy of service tax. This was the ratio of the decision in Shilpa Colour Lab.'s case (supra). The impugned order seeks to recover service tax on a portion of the contract amount relating to materials consumed/sold in the course of provision of construction service. As rightly pointed out by the appellant, clause 29A of article 366 of the Constitution provides that tax on the sale or purchase of goods includes inter alia, a tax on the transfer of property in goods whether as goods or in some other form involved in the execution of a works contract which reads as follows :— "(29A) 'Tax on the sale or purchase of goods includes'— (a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (b) a tax on the transfer of the property in goods (whether as goods or in some other form) involved in the execution of a works contract;.............. and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, deli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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