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TMI Blog2022 (5) TMI 479X X X X Extracts X X X X X X X X Extracts X X X X ..... the year 2008, Revenue observed that in terms of Circular No.98/1/2008-ST dated 04.01.2008 a service provider who paid service tax prior to 01.06.2007 for the taxable services like Erection, Commissioning and Installation Service, Commercial or Industrial Construction Service or Construction of Complex Service is not entitled to change the classification of the Single Composite Service for the purposes of payment of service tax on or after 01.06.2007 and therefore, the appellants are not entitled to avail the Composition Scheme. A show cause notice dated 20.04.2010 was issued to the appellants denying the classification of the services rendered by the appellants under Works Contract Service and demanding a service tax of Rs.28,08,44,455/-; the show cause notice also demanded service tax on client‟s disputed amount before 01.06.2007 and mobilization advance Cess after 01.06.2007; the show cause notice further demanded service tax on the services rendered by the appellant as a sub-contractor during the period April 2006 to March 2007. The proposals in the show cause notice were confirmed by Order-in-Original No.98/2011 dated 29.04.2011. Hence, this appeal. 2. Shri M.S. Nagaraj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal provisions. He extracts Rule 3(1) of the Works Contract Rules and submits that the said Rule specifically refers to "the person liable to pay service tax in relation to Works Contract Service" has an option to pay service tax under the Composite Scheme; w.e.f. 01.06.2007 the person liable to pay service tax on Works Contract become entitled to exercise the option before payment of service tax in respect of the said Works Contract; in the instant case, the appellants sought re-classification of the Composite Contracts of "Construction of Complex‟ under Works Contract and exercise the option on 14.06.2007 prior to payment of service tax. He submits that payment of service tax on composite contracts executed before 01.06.2007 cannot be construed as payment of tax on taxable service as the said composite contracts were not liable to pay service tax before 01.06.2007 in view of the L&T judgment. He further relies on the following case laws and submits that denial of option to pay service tax under Composite Scheme is not legal and proper: * B R Kohli Constructions Pvt. Ltd. Vs CST, New Delhi, 2017 (5) GSTL 182 (Tri. Delhi). * Indu Projects Ltd. Vs CCE & C & ST, Hyderabad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants named as Vasundhara, Meghana and Shalini etc; the principal contractor vide letter dated 03.09.2010 have clarified that they have paid the entire service tax for the impugned period; moreover, the same being Works Contract not liable to pay service tax before 01.06.2007; demand of duty by relying on a Circular No.967/7/2007-ST dated 28.03.2007 is not sustainable. 8. Learned Advocate submits that the SCN issued on 20.04.2010 proposing to recover duty for the prior period 01.06.2007 and denying the option for the period June 2007 to September 2009 is time barred. The appellant has been paying service tax 2006-07 onwards even on Composite Contracts; the issue is classification of a service and interpretation of a question of law, giving rise to various interpretations which were finally settled by the Apex Court in the L&T case (supra); therefore, it cannot be alleged that the appellants have suppressed any material fact with an intent to evade payment of duty; lapses, if any, on the part of the appellant are bona fide and therefore, longer period cannot be invoked in view of the following case laws: * Kiran Ispat Udyog Vs CCE, Rajkot- 2015 (321) ELT 182 (SC). * Jaipr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stallations for transport of fluids, heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape staircases or elevators; or (b) Construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry; or (c) Construction of a new residential complex or a part thereof; or (d) Completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c); or (e) Turnkey projects including engineering, procurement and construction or commissioning (EPC) projects;" 11. We find that various disputes were raised regarding the taxability of Works Contract prior to 01.06.2007 all the disputes got settled in view of the judgment of the Apex Court in the case of L&T. Apex Court has observed as follows: 43. We need only state that in view of our finding that the said Finance Act lays down no charge or machinery to levy and assess service tax on indivisible composite works contracts, such argument must fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract (Composition Scheme for Payment of Service Tax) Rules, 2007 and therefore they did not go into the said issue. However, it is worthwhile to note that the above decision was rendered before the landmark judgment in the case of L&T was rendered. Therefore, the same cannot take precedence over the judgment in L&T wherein it was categorically held that Composite Contracts were not taxable before 01.06.2007. We find that neither the CBEC nor the adjudicating authority had the benefit of this judgment at the material point of time. Therefore, in our considered opinion ratio of the judgment of Nagarjuna Construction Co. Ltd. (supra) cannot be relied upon in this case. 13. In the instant case, the appellants have been paying service tax under Construction of Complex Services etc. before 01.06.2007. On introduction of service tax on "Works Contract‟, the appellants had written to the Department for clarification. They have submitted a letter on 14.06.2007 that they will be opting for Composition Scheme. The Department has demanded the duty denying the opportunity. We find that the Rule 3 (1) of Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 provide as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service tax liability under works contract service after 1-6-2007. The dispute is only relating to their entitlement to pay the said tax in terms of the composition scheme of 2007. The Original Authority held that the appellants switched over from "construction service‟ to "works contract service‟ without intimating the service tax department and thus contravened the provisions of the said scheme. We note that the activities carried out by the appellants are taxable only w.e.f. 1-6-2007. In such situation, it is clear that their payment of tax in terms of composition scheme should be examined for correctness based on the said provisions only. It is seen that there is no format or prescribed specific procedure for exercising separate option under the scheme. After the introduction of new tax entry when the appellants discharged service tax in terms of the applicable provisions, it is clear their entitlement cannot be denied. We note that in terms of calculation in Annexure B to the show cause notice, the differential service tax is only relatable to denial of the said composition scheme to the appellant. We find that the denial of composition scheme by the Original Auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the reason that they have been paying service tax before 01.06.2007 though they were not legally required to pay in view of the judgment in the case of L&T. 16. Coming to the other issues regarding demand of duty on advances, client held disputed amounts and liability to service tax as a sub-contractor, we hold that as the service itself is not taxable before 01.06.2007, the demands pertaining to the period before 01.06.2007 are not sustainable. The demand on service rendered as a sub-contractor is prior to 01.06.2007. Liability to duty on other two counts after 01.06.2007 requires to be verified as the appellants claimed that they have paid duty at the compounded rates as per the option exercised by them. Moreover, we find that the show cause notice has been issued invoking the extended period. Looking into the fact that the appellant had been a regular service tax payer and have informed the Department vide letter dated 14.06.2007 and as the issue involves interpretation of statute, no mala fides can be imputed to the appellants. Therefore, we hold that for this reason also, the demand for the extended period needs to be set aside. 17. The appellants claimed that after 01. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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