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TMI Blog2020 (12) TMI 282X X X X Extracts X X X X X X X X Extracts X X X X ..... duty paid on the inputs namely vulcanized rubber etc. and also on the service tax paid on input services and had utilized the same towards payment of service tax for the taxable services provided by them. The officers were of the opinion that with effect from 1.7.2012, the activity would fall under works contract service. Further, that the assessee was discharging service tax on the gross amount received by them. In doing so, the assessee included the value of consumables / goods used for providing service. It appeared to the department that the services being under the category of works contract service, the assessee is barred from taking CENVAT credit on inputs and ought to have determined the value for payment of service tax as per Rule 2A(ii)(B) of Service Tax (Determination of Value) Rules 2006 thereby not including the value of consumables / goods. The assessee had thus not only wrongly availed CENVAT credit but also did not discharge the correct amount of service tax on the taxable service provided by them. Show Cause Notices were issued for different periods alleging the above, proposing to classify the activity as works contract service, to demand the short-paid service ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Involved ST/41437/2015 S. No. 78/2014 JC (ST) dated 24.9.2014 July 2012 to March 2013 / April 2013 to March 2014 ST/41996/2017 Sl. No. 78/2014 JC (ST) dated 24.9.2014 April 2014 to Jul 2015 ST/41056/2015 S. No. 08/2017-ST-COMMR-TRY dated 9.11.2017 July 2012 to March 2016 ST/41129/2018 S. No. 12/2016/COMMR-MDU dated 14.12.2016 July 2012 to Sep. 2015 ST/41985/2018 (Deptt. Appeal) S. No. 8/2017-ST-COMMR-TRY dated 9.11.2017 July 2012 to March 2016 5.1 On behalf of the assessee ld. Counsel Shri S. Muthu Venkataraman appeared and argued the matter. It is submitted by him that while providing service of retreading of tyres, the assessee utilized inputs in the nature of tread rubber, vulcanizing rubber etc. They availed CENVAT credit of duty paid on such inputs and discharged the service tax on the gross value as under section 67(1) of the Finance Act, 1994. The service tax was paid in cash and also adjusted from CENVAT credit. The department is of the view that the assessee has to discharge service tax liability determining the value of the service portion in the works contract by adopting Rule 2A(ii)(B) of Service Tax (Determination of Valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of section 67 ....' which would mean that this Rule is subject to section 67 and does not take away the right to pay service tax under section 67. The assessee has option to choose the value determined either under section 67 of the Finance Act or determine value under Rule 2A(ii)(B) of Service Tax (Determination of Value) Rules 2006. Section 67 of the Finance Act 1994 does not have any condition in regard to availment of CENVAT credit on inputs used in providing output service. Whereas Rule 2A imposes a bar to avail credit. The department cannot thrust upon the assessee the valuation method under Rule 2A(ii)(B) of Service Tax (Determination of Value) Rules 2006 when assessee has opted to pay service tax under section 67 on the gross amount charged. The Valuation Rules cannot override section 67 and in case of conflict between Act and Rules, the Act will prevail. 5.5 To support his argument that payment of service tax for WCS under section 67 on gross amount charged is correct, he relied upon the decision of the Tribunal in the case of S.V. Jiwani Vs. Commissioner of Central Excise & Service Tax, Vapi reported in 2014 (35) STR 351 (Tri. Ahmd.). The issue as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 to Mar16 Total 1. Service tax liability paid by our company (Ref. 1 below) in terms of sec. 67 of the Act 5867539 7331697 8277777 4697576 4732657 30907246 2. Service tax liability calculated by adopting valuation as per Rule 2A(i) (Ref. 2 below 4061405 5870063 6429566 3493408 3128910 22983353 3. Additional service tax paid by us in comparison with valuation as per Rule 2A(i) (1 - 2) 1806134 1461633 1848211 1204168 1603747 7923894 S. No. Particulars Jul 12 to Mar 13 Apr 13 to Mar 14 Apr 14 to May 15 June 15 to Oct 15 Nov 15 to Mar 16 Total 1. Actual service tax paid details In cash 5662803 6967708 7797357 4424992 4522299 29375159 Input Service 204736 363989 480420 272584 210358 1532087 Total service tax paid 5867539 7331697 8277777 4697576 4732657 30907246 2. Working of Service Tax liability by adopting valuation as per Rule 2A(i) S. No. Particulars Jul 12 to Mar 13 Apr 13 to Mar 14 Apr 14 to May 15 June 15 to Oct 15 Nov 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 97 that the activity in question would be a works contract. The question to be addressed in these appeals is whether a works contract can be assessed with reference to section 67 of the Finance Act, 1994 without recourse to Rule 2A of the Service Tax (Determination of Value Rules) 2006 which specifically deals with valuation of service portion of a works contract. The Hon'ble Supreme Court in the case of Safety Retreading Co. Pvt. Ltd. supra in para 10 of the judgment has held as follows:- "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%". In other words, the Hon'ble Supreme Court has held that the method of assessment adopted by the appellant in the present case of paying tax on the gross value charged including value of goods is not in accordance with law. 6.2 The assessee has placed on record various case laws to the effect that service tax may be paid w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led by the assessee may be dismissed. Appeal No. ST/41985/2018 filed by the department with regard to wrong availment of CENVAT credit may be allowed 7. We have heard the arguments of both sides and perused the records. 8.1 Though the assessee had taken registration only under maintenance and repair service and there is detailed discussion in the orders by authorities below with regard to the classification of the service, at the time of argument, the ld. counsel appearing for the assessee submitted that the activity of retreading tyres falls under works contract service and that the assessee does not dispute the classification as WCS. 8.2 The issue for analysis therefore narrows down to the point as to whether the assessee is correct in discharging service tax on gross amount charged under Section 67 of the Finance Act, 1994 after availing CENVAT credit on inputs or whether they have to pay service tax under Rule 2A(ii)(B) of Service Tax (Determination of Value) Rules 2006 as assessed by the department. 8.3 For better appreciation, the relevant provisions of law are reproduced as under:- Section 65(44) of Finance Act, 1994, defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged. (3) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service. (4) Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in such manner as may be prescribed. Explanation. - For the purposes of this section, - (a)"consideration" includes - (i) any amount that is payable for the taxable services provided or to be provided; (ii) any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service, except in such circumstances, and subject to such conditions, as may be prescribed; (iii) any amount retained by the lottery distributor or selling agent from gross sale amount of lottery ticket in addition to the fee or commission, if any, or, as the case may be, the discount received, that is to say, the difference in the face value of lottery ticket and the price at whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lude value added tax or sales tax, as the case may be, paid or payable, if any, on transfer of property in goods involved in the execution of the said works contract; (b) value of works contract service shall include, - (i) labour charges for execution of the works; (ii) amount paid to a sub-contractor for labour and services; (iii) charges for planning, designing and architect's fees; (iv) charges for obtaining on hire or otherwise, machinery and tools used for the execution of the works contract; (v) cost of consumables such as water, electricity, fuel used in the execution of the works contract; (vi) cost of establishment of the contractor relatable to supply of labour and services; (vii) other similar expenses relatable to supply of labour and services; and (viii) profit earned by the service provider relatable to supply of labour and services; (c) Where value added tax or sales tax has been paid or payable on the actual value of property in goods transferred in the execution of the works contract, then, such value adopted for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other contract, after deducting- (i) the amount charged for such goods or services, if any; and (ii) the value added tax or sales tax, if any, levied thereon: PROVIDED that the fair market value of goods and services so supplied may be determined in accordance with the generally accepted accounting principles. Explanation 2.--For the removal of doubts, it is clarified that the provider of taxable service shall not take CENVAT credit of duties or cess paid on any inputs, used in or in relation to the said works contract, under the provisions of CENVAT Credit Rules, 2004." 8.6 According to ld. counsel for assessee, Rule 2A is subject to the provisions of section 67 and therefore the assessee can opt for payment of service tax under section 67 also. On bare perusal of the provisions of law noticed above, it would show that section 67 is the charging section which lays down the liability to pay service tax on the consideration received for providing taxable service. Rule 2A provides for a mechanism to chalk out that part of the consideration in a WCS which can be subjected to service tax. 8.7 Be that as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ong effort to argue that the assessee cannot be said to have discharged the entire service tax liability and that there is loss suffered by the Revenue when the tax is paid under section 67 of the Finance Act, 1994. On perusal of the worksheet given by the ld. AR, it is seen that if Rule 2A is applied, the assessee would not be able to avail CENVAT credit and therefore would have to pay entire service tax by cash and thus there is revenue loss. This contention of the department that if no CENVAT credit is availed, the assessee would not be able to adjust payment of service tax from CENVAT account and therefore there is short-payment of service tax cannot be accepted since in the above decisions, it has been decided and concluded that the assessee can avail CENVAT credit and discharge service tax under section 67 of the Finance Act. The argument of revenue loss also fails. We hold that the demand raised alleging short payment of service tax cannot sustain. The impugned orders in Appeal Nos. ST/41437/2015; ST/41996/2017; ST/41056/2018; ST/41129/2018 are set aside. 8.10 The issue with regard to whether assessee is eligible to avail CENVAT credit by discharging service tax under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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