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TMI Blog2022 (2) TMI 1122X X X X Extracts X X X X X X X X Extracts X X X X ..... re the demands up to 2012 cannot be sustained and needs to be set aside. As far as the period post 2012 is concerned, the appellant s contention is that although they are liable to pay service tax on the Works Contract , but they were entitled to abatement in terms of Rule 2A(ii)(A) of service Tax (Determination of Value) Rules, 2006 - major portion of the demand which pertains to period prior to 2012 cannot be sustained in view of the judgment of the Supreme Court in the case of Larsen Toubro Ltd. and it needs to be set aside and is set aside. In respect of the period post 2012 the impugned order is not clear as to how the Commissioner has concluded that the appellant had availed CENVAT credit on the inputs. For this period, the Commissioner s findings in the impugned order are sketchy in respect of two service recipients and there are no findings in the remaining two service recipients. Further, in respect of the labour contract, which is said to have been rendered during 2010-11 by the appellant to M/s Pratibha Industries Ltd., an amount of 39,196/- has been confirmed in the impugned order. It needs to be seen whether this amount is already covered by the service tax already pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be available only if the amount of penalties have also been paid with other dues within the period of said thirty days with other dues; (vii) I impose penalty of 50% of amount of service tax which pertain to the period from 08.04.2011 to 31.03.2013 and confirmed at (i) above, under proviso to Section 78 of the Finance Act, 1994. However, if such service tax and the interest payable thereon determined above is paid within thirty days from the date of communication of this order, the amount of penalty liable to be paid by the assessee shall be twenty five per cent of amount of service tax which pertain to the period from 08.04.2011 onwards and confirmed at (i) above, in terms of third proviso to Section 78 of the Finance Act, 1994; however, the benefit of reduced penalty shall be available only if reduced penalty with amounts due has also been paid within the period of said thirty days with other dues. 2. The facts of the case, in brief, are that the appellant is engaged in providing 'construction services other than residential complex, including commercial/industrial building or civil structure' and "works contract services". It has been paying service tax and filing ST-3 Retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any other Act, for the purpose of levy of collection of service tax, shall be construed as references to the provisions of Section 66B". In other words prior to 1.07.2012, service tax could be levied only if the particular service was covered as a taxable service while after 1.7.2012, every service other than what is listed in the negative list became taxable. As can be seen from the table above, the impugned order covered the period 2008-09 to 2012-13 in respect of the services which were said to have been rendered by the appellant to nine service recipients. Of these nine, services to only four viz., M/s Harsha Abakus Solar Pvt Ltd., M/s Indus Project Ltd., Refex Energy Ltd. and M/s Zuberi Engineering Co. were rendered partly after 1.7.2012. Services to the rest were provided prior to 1.7.2012. Further, in respect of one service rendered to M/s Pratibha Industries Ltd. during 2010- 11, it has been indicated in the table that the contract was merely a labour contract. In all the remaining cases it is undisputed that the service rendered by the appellant involved both supply of materials and rendition of services. 4. Leaned counsel for the appellant submits that no demand under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecies of contract known to commerce. The State Government of Madras had in Gannon Dunkerley, taxed the material used by builders in the course of construction deeming the materials used in construction to have been sold. This taxing provision was assailed by Gannon Dunkerley and the Supreme Court held that 'Composite Works Contract' are a special species of contracts known to commerce and the State of Madras had no power to levy sales tax on the materials used in executing works contracts. Thereafter, Constitution of India was amended (46th Amendment) by the Parliament in 1983 and clause 29A was inserted in Article 366 enabling the states to tax such transfer of goods deeming them to be a sale or purchase of goods. 9. After the 46th Amendment States were empowered to tax the transfer of goods used in 'Composite Works Contract' deeming them to be sales. The power of Parliament to levy service tax on the service component of the 'Works Contract' was never in doubt as the Parliament has residual powers of legislation under S.No. 97 of List 1(Union First) of the Seventh Schedule to the Constitution of India. 10. The service tax itself was levied under the Finance Act, 1994 exercisin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osite works contracts. This is clear from the very language of Section 65(105) which defines "taxable service" as "any service provided". All the services referred to in the said sub-clauses are service contracts simpliciter without any other element in them, such as for example, a service contract which is a commissioning and installation, or erection, commissioning and installation contract. Further, under Section 67, as has been pointed out above, the value of a taxable service is the gross amount charged by the service provider for such service rendered by him. This would unmistakably show that what is referred to in the charging provision is the taxation of service contracts simpliciter and not composite works contracts, such as are contained on the facts of the present cases. It will also be noticed that no attempt to remove the non-service elements from the composite works contracts has been made by any of the aforesaid Sections by deducting from the gross value of the works contract the value of property in goods transferred in the execution of a works contract. 25. In fact, by way of contrast, Section 67 post amendment (by the Finance Act, 2006) for the first time prescr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax) Rules, 2007 was also notified in which service providers could opt to pay service tax at percentages ranging from 2 to 4 of the gross value of the works contract. 29. It is interesting to note that while introducing the concept of service tax on indivisible works contracts various exclusions are also made such as works contracts in respect of roads, airports, airways transport, bridges, tunnels, and dams. These infrastructure projects have been excluded and continue to be excluded presumably because they are conceived in the national interest. If learned counsel for the revenue were right, each of these excluded works contracts could be taxed under the five sub- heads of Section 65(105) contained in the Finance Act, 1994. For example, a works contract involving the construction of a bridge or dam or tunnel would presumably fall within Section 65(105)(zzd) as a contract which relates to erection, commissioning or installation. It is clear that such contracts were never intended to be the subject matter of service tax. Yet, if learned counsel for the revenue is right, such contracts, not being exempt under the Finance Act, 1994, would fall within its tentacles, which was neve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o M/s Refex in paragraph 23 of the impugned order. He has not given any findings in respect of the services rendered to the other two service recipients (M/s Indu and M/s Zuberi). In both paragraphs (19 and 23), the observations made by the Commissioner are as follows: "I observe that the assessee has failed to substantiate that they were eligible for such valuation since they have not shown that they had not availed 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. Further the assessee has also not shown that they were even eligible for abatement for 'Commercial or Industrial Construction'. They also failed in showing even by the taxation correctly determined their service tax liability. In other words Commissioner findings is that he was not specified with the evidence produced by the appellant that they had not availed CENVAT credit for the inputs used. And there is no positive finding that they had availed the CENVAT credit. This is something which can be easily verified from the ST-3 Returns and other records. The Commissioner has also examined the legal provision to see ..... X X X X Extracts X X X X X X X X Extracts X X X X
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