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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 ..... out that part of the consideration in a WCS which can be subjected to service tax. - the discharge of service tax liability at full rate by the appellant by applying the provisions of section 67 of the Finance Act, 1994 cannot be called in question by the Revenue The issue with regard to whether assessee is eligible to avail CENVAT credit by discharging service tax under section 67 having been held in favour of the assessee, consequently, the appeal filed by the department alleging wrong availment of credit is without any merits. Time Limitation - HELD THAT:- The issue is in the nature of interpretation of provisions of law. The very same issue was under litigation and issue is held in favour of assessee which has been accepted by department. The assessee has indeed discharged service tax as determined under section 67. There is no evidence of deliberate act of intention to evade service tax - the demand raised invoking extended period cannot sustain. The assessee succeeds on the issue of limitation also. Appeal allowed - decided in favor of appellant. - Service Tax Appeal No. 41437 of 2015, 41996 of 2017 with Service Tax Appeal No. 41056 of 2018 & Service Tax Misc. Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee approached the Commissioner of Central Excise (Appeals) who upheld the orders passed by the original authority. 3. Appeal No. ST/41985/2018 has been filed by the department against the order passed by the Commissioner vide Order-in-Original No. 1/COMMR/ST dated 12.1.2018. Show Cause Notice was issued to the assessee for the period April 2014 to March 2016 inter alia, alleging wrong availment of CENVAT credit. The department was of the view that the assessee ought to have discharged service tax as determined under Rule 2A(ii)(B) of Service Tax (Determination of Value) Rules 2006 and therefore the CENVAT credit availed by them on the inputs is ineligible. According to department, after 1.7.2012, the retreading activity falls under works contract service. Since the property in the goods is transferred while rendering service, the said activity would fall under works contract service. The assessee has discharged service tax on the gross amount charged, thereby including the value of goods as well as value of service for payment of service tax. They availed CENVAT credit on the duty paid on inputs also. For discharging service tax for works contract service the value of goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso alleged that the assessee is barred from availing CENVAT credit when service tax is to be paid under Rule 2A(ii)(B). Show Cause Notices have been issued alleging the above contraventions. 5.2 It is submitted by the counsel that the assessee from the very beginning conceded that the activity of retreading of tyres falls under WCS with effect from 1.7.2012. The authorities below have unnecessarily dealt with the classification of service and that there is no dispute on the issue of classification. He adverted to the definition of service, works contract service and also section 67 contained in the Finance Act, 1994. Rule 2A of Service Tax (Determination of Value) Rules 2006 was also referred to. He submitted that assessee has paid service tax as per section 67 of Finance Act, 1994. Section 67 does not prohibit the availment of CENVAT credit. The goods used for providing works contract service in the nature of retreading of tyres are covered within the definition of inputs under CENVAT Credit Rules, 2004. The assessee has thus correctly availed credit on inputs. They discharged service tax on the gross amount charged (including the value of goods) as under section 67. In fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 67 of Finance Act, 1994 on gross amount charged after availing CENVAT credit on inputs or whether they have to follow Rule 2A for discharging service tax without availing CENVAT credit was discussed in the said decision. The Tribunal held the issue in favour of the assessee holding that the payment of service tax for WCS under section 67 on the gross amount charged after availing CENVAT credit was proper. This decision was challenged before the Hon'ble High Court of Bombay by the department and vide judgment reported in 2016 (42) STR 209 (Bom.), the Hon'ble High Court dismissed the appeal filed by department. Similar view was taken by the Tribunal in the case of Interarch Building Products P. Ltd. Vs. Commissioner of Service Tax, Noida reported in 2018 (10) GST 360 (Tri. All.). Further, the decision of the Hon'ble High Court of Bombay wherein the decision of the Tribunal was upheld has been accepted by the Department as per their Circular No. 1063/2/2018-CX dated 16.2.2018. 5.6 The ld. counsel also pointed out that in the case of S.V.Jiwani, the Hon'ble High Court of Bombay observed that as both sides had conceded that there is no revenue loss even if tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tification which is more beneficial to the assessee. 5.10 He argued on the ground of limitation also. Show Cause Notices have been issued invoking the extended period of limitation. Since the issue is of interpretation and as there were litigations on the very same, the Show Cause Notices issued invoking the extended period and the penalties imposed cannot sustain. He prayed that the appeals filed by the assessee may be allowed. The department appeal may be dismissed. 6. The ld. AR Smt. Sridevi and Shri Arul C. Durairaj appeared and argued on behalf of the department. The summary of written submissions is as under:- 6.1 As far as the classification of the retreading activity is concerned, it is submitted that the issue is no longer res integra and has been settled by the Hon ble Supreme Court of India in the case of Safety Retreading Co. Pvt. Ltd. reported in 2017 (48) STR 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 specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s revenue loss. The chart submitted by ld. AR is as under:- Appeal No. Tax assessed u/s 67(1) Tax assessed u/r2(A) Difference in cash payment of tax (Revenue loss) Gross value Total Tax Adjusted in CENVAT Credit Paid in cash 70% of gross value Tax payable ST/41437/2015 4,45,42,073 21,66,647 1,80,496 19,86,151 3,11,79,451 38,53,780 18,67,629 6,25,98,864 33,05,941 1,08,998 31,96,943 4,38,19,205 54,16,054 22,19,111 ST/41996/2017 9,07,06,341 51,15,711 3,28,490 47,87,221 6,34,94,439 80,24,820 32,37,599 ST/41056/2018 52,78,47,046 6,76,62,20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of any movable or immovable property or for carrying out any other similar activity or a part thereof in relation to such property; As per section 66E(h) service portion in the execution of a works contract is a declared service. From the above definitions, it can be seen that only the service portion in the execution of works contract is a taxable service. Section 67 talks about valuation of taxable service for charging service tax and the same reads as under:- (1) Subject to the provisions of this Chapter, where service tax is chargeable on any taxable service with reference to its value, then such value shall, - (i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money as, with the addition of service tax charged, is equivalent to the consideration; (iii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used by them. The assessee paid service tax on the whole of ₹ 100/-. While doing so, they availed CENVAT credit on the duty paid on vulcanized rubber tread rubber which are inputs for providing the output service. The credit so availed was utilized / adjusted to pay part of the service tax. 8.5 It has to be noted that the taxable service in the works contract is only the service portion and not the value of the goods involved. Since there is an element of transfer of property of goods involved (sale) while providing the works contract service which may always not be easy to segregate. Service tax (Determination of Value) Rules, 2006 would help to determine the value of service portion in the execution of works contract. Rule 2A of the said Rules reads as under:- 2A. Determination of value of service portion in the execution of a works contract.- Subject to the provisions of section 67, the value of service portion in the execution of a works contract , referred to in clause (h) of section 66E of the Act, shall be determined in the following manner, namely:- (i) Value of service portion in the execution of a works contract shall be equivalent to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (A) and (B), including maintenance, repair, completion and finishing services such as glazing, plastering, floor and wall tiling, installation of electrical fittings of an immovable property , service tax shall be payable on sixty per cent. of the total amount charged for the works contract; Explanation 1. - For the purposes of this rule,- (a) original works means- (i) all new constructions; (ii) all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable; (iii) erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise; (i) maintenance or repair or reconditioning or restoration or servicing of any goods; or (ii) maintenance or repair or completion and finishing services such as glazing or plastering or floor and wall tilling or installation of electrical fitting of immovable property, Service tax shall be payable on seventy per cent of the total amount charged for the works contract. (d) total amount means the sum total of the gross amount charged for the works contract and the fair mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble High Court of Gujarat in the case of M/s SV Jiwani in Central Excise Appeal No. 252/2014 where the Hon'ble High Court had inter alia held on the question framed, whether input service credit could have been availed without exercising the options provided in Rule 2A of the Service Tax (Determination of Values) Rules, 2006 or whether CENVAT credit can be claimed after discharging the liability in full, that having paid the service tax in full, Revenue is not incurring any loss of revenue, hence the Court should not undertake an academic exercise. 3.2 In the matter the issue that was examined by the Hon ble Court was that, whether input service credit could have been availed without exercising the options provided in Rule 2A of the Service Tax (Determination of Values) Rules, 2006 after having discharged the tax liability in full. It was held by the Hon ble Court that that having paid the service tax in full, Revenue has not incurred any loss of revenue hence Court should not undertake an academic exercise. 8.8 By judicial discipline, we are bound to follow the decisions of the Tribunal and also accepted by the Department. Needless to say that Circul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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