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TMI Blog2022 (12) TMI 523X X X X Extracts X X X X X X X X Extracts X X X X ..... The said Act also contained a similar provision stating that the option should be exercised by the dealer prior to payment of tax. Similarly, under the said Act, there was no prescribed form for exercising such option. In GE T and N India Limited Versus Commissioner of Central Excise and Service Tax, Large Tax Payer Unit, Chennai [ 2019 (12) TMI 858 - MADRAS HIGH COURT] , identical issue was considered and the Division Bench approved the view taken by the tribunal in the case of Vaishno Associates Versus CCE ST, Jaipur [ 2018 (3) TMI 417 - CESTAT NEW DELHI] wherein the court considered the composition scheme and pointed out that no format has been prescribed for making/exercising an option nor has it been specified as to whom the option must be addressed, the fact of the paying service at composition rate in the return filed by the service provider is enough indication to show that they have opted for payment under the works contract composition scheme. The payment of tax under the composition scheme upon notification of the scheme vide a notification no. 32 of 2007 dated 26.05.2007 by filing the return and paying tax at the compounded rate of 2% is sufficient compliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cate Mr Tapan Bhanja, Advocate .For the CGST Authorities Mr. Prithu Dudhoria, Advocate. For the Union of India JUDGMENT (Judgment of the Court was delivered by T.S.SIVAGNANAM, J.) 1. This intra court appeal filed by the writ petitioner is directed against the order dated July 01, 2016 in WP No. 23547 (W) of 2014 (2016 SCC Online Calcutta 3865). The said writ petition was filed by the appellant for issuance of a writ of declaration to declare the Notification No. 7 of 2008 dated 01.09.2008 enhancing the rate of service tax from 2% to 4% as illegal, ultravires the Finance Act, 1994 and the Constitution of India, and bad in law in so far as it seeks to levy additional burden of service tax upon the contracts for which the option under Notification No. 32 of 2007, dated 22nd May, 2007 as already been exercised by the appellant; for a declaration that notification No. 10 of 2012 dated 17.03.2012 effective from 01.04.2012 enhancing the rate of service tax from 4% to 4.8% as illegal, ultravires the Finance Act, 1994 and the Constitution of India, and bad in law in so far as it seeks to levy additional burden of service tax upon the contracts for which option unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of limitation was invoked on the alleged ground that the appellant had suppressed the date of exercise of option and continued to pay tax at the old rate that is 2%. Another show cause notice dated 21.10.2013 was issued alleging short payment of service tax at the enhanced rate of 4.8% as notified in Notification dated 17.03.2012 from 01.04.2012. The appellant by their response contended that the composition scheme which came into effect from 01.06.2007gives an option to the service tax provider under the works contract to pay service tax in relation thereto by paying an amount equivalent to 2% of the gross amount charged for the works contract. It was further stated that once the service provider exercises such option under the composition scheme the rates of service tax at the time of option would continue for the entire works contract period and the service provider cannot recite from the said scheme until the completion of the said works contract and therefore any change in the rate of tax on the basis of subsequent notification is impermissible and hit by the Doctrine of Promissory Estoppel. The reply submitted by the appellant was rejected by the department on the ground t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vary in course of the works contract and therefore they have incorporated the clause that any change in the existing rate of taxes or new tax being levied during the currency of the contract, the same would be paid by the appellant. The argument of the department was rejected by the learned Writ Court holding that the department for the purpose of construction of the composition scheme cannot be rely upon the conditions in the contract entered into between the appellant and private parties. It further held there is freedom of contract between two individuals unless it is against public policies. Finally, the Court proceeded to hold that the appellant having exercised the option for the first time only on 26.03.2008, the rate of tax shall be 4%. Aggrieved by such findings, the appellants are before us by way of this appeal. 5. When the appeal was heard, the Division Bench by order dated 11.04.2017 directed the appellant to file a comprehensive statement disclosing therein the particulars of vouchers through which the appellant claims that they had paid service tax at the rate of 2% under the composition scheme prior to 01.03.2008. This has been complied with by the appellant and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding anything contained in section 67 of the Act and rule 2A of the Service (Determination of Value) Rules, 2006, the person liable to pay service tax in relation to works contract service shall have the option to discharge his service tax liability on the works contract service provided or to be provided, instead of paying service tax at the rate specified in section 66 of the Act, by paying an amount equivalent to two per cent. of the gross amount charged for the works contract. Explanation .- For the purposes of this rule, gross amount charged for the works contract shall not include Value Added Tax (VAT) or sales tax, as the case may be, paid on transfer of property in goods involved in the execution of the said works contract. (2) 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. (3) The provider of taxable service who opts to pay service tax under these rules shall exercise such option in respect of a works contract prior to payment of service tax in respect of the said works contract and the option so exerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. It is required to be read in conjunction with sub rule (1) of Rule 3. 11. Sub rule (1) of Rule 3 is substantive portion of the rule which provides for an option to be exercised by the person liable to pay service tax. By virtue of the said rule, the person liable to pay service tax has an option to discharge the liability by paying the amount equivalent to 2% of the gross amount charged for the works contract instead of paying service tax at the rate specified in Section 66 of the Act. On a reading of sub rule (1) of Rule 3 shows that the option exercisable by this person liable to pay service tax is exercised by paying service tax at the 2% instead of rates specified in Section 66. Sub rule (3) of Rule 3 states that the provider of the taxable service who opts to pay service tax under the composition scheme shall exercise such option prior to the payment of service tax. If rule 3(1) and (3) and read in conjunction and harmoniously, the intention of the scheme is to give an option to the provider of taxable service to discharge his service tax liability by paying an amount equivalent to 2%. This being the substantive part of the scheme, sub rule (3) which is a machinery prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of services the tax had been paid at 2% under composition scheme. The proof of payment of tax along with the challan numbers. have also been given in the return. Admittedly, the assessing officer has accepted the return submitted by the assessee and has not raised any objection of any short payment of service tax in respect of such contracts were the appellant availed the option to discharge the service tax liability under the composition scheme. Thus, it can never be the case of the respondent department that the appellant failed to disclose their availment of the benefit under the composition scheme. Having steered clear of this factual issue, we will consider as to in what manner similar provisions has been dealt with by other High Courts in statutes which are pari materia. 13. In T. Azhakesan Versus State Tax Officer and Others 2021 SCC Online Mad 10505 , the Division Bench of the High Court of Madras considered a similar issue, but, arising under the provision of the Tamil Nadu Value Added Tax Act, 2006. The said Act also contained a similar provision stating that the option should be exercised by the dealer prior to payment of tax. Similarly, under the said Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t also noted that under the provisions of the TNGST Act and the rules framed thereunder, there is no prescribed format or procedure as to how the option should be exercised. After taking note of the decision of the Hon ble Division Bench in the case of Kikani Exports RIM [supra], wherein it was held that in the absence of any separate form provided for under the Rules or a separate method provided for exercising option to pay tax under Section 7-C of the TNGST Act, it can be safely concluded that the assessee by filing a return and paying tax at compounded rate has exercised the option under the said provision and therefore the Assessing Authority committed error in holding that the dealer did not exercised his option and accordingly, the said question was answered in favour of the dealer. The operative portion of the order reads as follows: In this regard, useful reference can be made to the decision of the Hon ble Division Bench of this Court in the case of Commissioner of Income Tax Versus Kikani Exports Private Limited, in TCA No. 330 of 2013 etc. batch dated 09.09.2014. The substantial question of law, which arose for consideration before the Hon ble Division Bench was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he return of income under sub-section (1) of Section 139, it is of no avail. This assumes importance, as no procedure is prescribed for exercising the option. Form ITR-6 gives the methodology on which deprecation can be claimed and therefore, the statue did not provide for any other method to exercise the option except through filing of that an option should be exercised separately would make the returns filed meaningless. The above referred decision can very well be applied to the facts of the present case, as under the TNGST Act or the Rules framed thereunder, there is no separate form provided or any separate method provided for exercising the option to pay tax under Section 7-C of the TNGST Act. Therefore, it can be safely concluded that the assessee by filing a return and paying tax under Section 7-C of the TNGST Act amounts to exercising option under the said provision. Thus, the respondents committed an error in holding that the petitioner did not exercise his option. Therefore, the first question is answered in favour of the petitioner and against the revenue. We are informed that the above order has become final as the revenue has not carried the matter on appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal which have held on the above lines and those decisions have attained finality and one such decision being in the case of M/s. ABL Infrastructure Private Limited Versus Commissioner of Central Excise, Nashik 2015(2) TMI 801-CESTAT Mumbai. Thus, it can be safely held that the payment of tax under the composition scheme upon notification of the scheme vide a notification no. 32 of 2007 dated 26.05.2007 by filing the return and paying tax at the compounded rate of 2% is sufficient compliance of exercise of option under the scheme and therefore the subject contracts for which tax had been remitted by the appellant at the rate of 2% is permissible and acceptable under law. 16. The next aspect is whether the extended period of limitation could have been invoked. The disputed period can be divided into two the first of which being from March 2008 to March 2012. For this period, the show cause notice for the periods from March 2008 to March 2011 have all been issued after a long delay as the show cause notices were issued on 17.04.2013. The said show cause notice also covered the period from April 2011 to September 2011 and October 2011 to March 2011 but for such period the show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to the decision of the Hon ble Supreme Court in Nagarjuna Constructions Company Limited Versus Government of India 2012(28) STR 561 (SC) for the proposition that the appellant having failed to exercise the option prior to the payment of tax is not entitled to the benefit of the composition scheme at 2%. On this aspect, we have already interpreted Rule 3(1) and (3) of the composition scheme and given our reasons as to how there has been compliance of the rule and in the absence of any statutory form for exercise of option, the filing of the return, mentioning the relevant notification number. and payment of tax at the compounded rate is sufficient compliance of exercise of option under the scheme. That apart, we note the facts in Nagarjuna Constructions to be entirely different. Since the appellant therein had already paid the taxes and did not opt to pay the service tax under the composition scheme but later sought for such a benefit which was negatived. Therefore, the said decision is inapplicable to the facts and circumstances of the case on hand. 18. As noticed by us above, the substantial part of the order passed by the learned Single Bench enures in favour of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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