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TMI Blog2024 (2) TMI 1254X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of services therefore the appellant reclassified their activity from construction services to works contract service for ongoing projects and paid the service tax at the prescribed rate of 2% on the total value of the works contract. The Appellant was issued show a cause notice demanding differential service tax on the ground that in terms of Rule 3 (3) of the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007, the provider of taxable service who opts to pay the service tax in relation to "Works Contract Service" shall exercise the option for payment of service tax under works contract service before exercising such option. Further that as per CBEC Circular No. 98/01/2008 - ST dated 04.01.2008 benefit of Composition Scheme under "Works Contract Service" are not admissible for on-going projects. It was claimed by the department that the appellant was wrongly availing the benefit of the composition scheme by changing the classification of their service from Construction & Industrial Construction services to the Works Contract Service for the said purpose. Both the lower authorities have confirmed the demand along with penalty against the Appellant. 1.1 H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax entry works contract service. It can be understood from the interpretation by the Hon'ble Supreme Court in the case of Larsen & Toubro Ltd (supra) that there is no liability to service tax in respect of indivisible composite works contract prior to 01.06.2007. In the present case the Appellant is not contesting their service tax liability under works contract service after 01.06.2007 but their entitlement to pay the said tax in terms of composition scheme of 2007. The original authority held that the appellants switched over from construction service to works contract service only to avail the benefit of the scheme and thus are in contravention of the provisions of the said scheme. It has been observed that the denial of the composition scheme by the Adjudicating Authority is only based on the change of head from Commercial or Industrial construction service to works contract service that because of which the Appellant cannot opt for payment of service tax under works contract service under the composition scheme. The legal position with regards to the said dispute has been settled by the Hon'ble Supreme court in Larsen & Toubro (supra) wherein the Apex court has held that subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the assessee is eligible to avail the composition scheme under 'works contract service' form 01.06.2007 has been elaborately considered by relying upon Hon'ble Gujarat High Court, in the case of JMC Project India Ltd by this Tribunal order No. A/10510-10511/2022 the relevant order is reproduced below:- "04. We have considered the submissions made by both the sides and perused the records. We find that the case of the department is that Appellant was paying service tax under Commercial or Industrial Construction Service / Construction of Complex Service for the period prior to 01.06.2007. However, after introduction of work contract service w.e.1. 01.06.2007 Appellant switched over to payment of Service tax from Commercial or Industrial Construction Service/ Construction of Complex Service to Works Contract Service Composition Scheme w.e.f. 01.06.2007 for ongoing projects. As per the Provision of Works Contract (Composition Scheme for Payment of Service tax) Rules, 2007, Appellant was not eligible for the benefit of composite scheme for ongoing projects for which service tax paid before 01.06.2017 under Commercial or Industrial Construction Service/ Construction of Complex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract. Once such an option is made, it is applicable for the entire contract and cannot be allered. Therefore, in case a contract where the provision of service commenced prior to 1-6-2007 and any payment of service tax was made under the respective taxable service before 1-6-2007, the said condition under rule 3(3) was not satisfied and thus no portion of that contract would be eligible for composition scheme. On the other hand, even if the provision of service commenced before 1-6-2007 but no payment of service tax was made it the taxpayer opted for the composition scheme after its coming into effect from 1-6-2007, such contracts would be eligibile for opting of the composition scheme. 4. The Board's previous Circular No. 98/1/2008-S.T., dated 4-1-2008 and the ratio of judgment of the High Court of Andhra Pradesh in the matter of M/s. Nagarjuna Construction Company Limited v Government of India (2010 (19) S.T.R. 321 (A.P.) 2010 TIOL 403 HC AP ST) are in line with the above interpretation. 5. Trade Notice/Public Notice may be issued accordingly. From the above circular, it is clear that for the ongoing contracts which were classified where service tax has been paid in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hra Pradesh was upheld by the Horrible Supreme Court reported as 2012 (28) S.T.R. 561 (S.C.). The Han'ble Supreme court held as under 25. In our opinion the High Court did not commit any mistake while upholding validity of the Impugned Circular. 26. In our opinion the Impugned Circular has only explained the contents of Rule 3(3) of the 2007 Rules so as to provide guidelines to the Revenue Officers. 27. On perusal of Rule 3(3) of the 2007 Rules it is very clear that the assessee who wants to avail of the benefit under Rule 3 of the 2007 Rules must opt to pay service tax in respect of a works contract before payment of service tax in respect of the works contract and the option so exercised is to be applied to the entire works contract and the assessee is not permitted to change the option till the said works contract is completed. 28. In the instant case it is an admitted fact that the appellant-assessee had already paid service tax on the basis of classification of works contract which was in force prior to 1st July, 2007. In the circumstances, it cannot be said that the appellant had exercised a particular option with regard to the mode of payment of tax after 1st Jul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue involved in the present matter is whether Appellant were entitled to the benefit of the payment of service tax under the composition scheme on ongoing projects. Clearly, case of Larsen & Toubro Ltd. is on different footing and has no relevance to the present case. 4.3 As regard simultaneous penalties under section 76 and 78, we agree with the submission of the appellant that as per the settled legal position penalty under section 76 is not tenable when penalty under section 78 is imposed. This issue no longer res integra. We are, therefore of the view that appellant is not liable for penalty under section 76. Accordingly simultaneous penalty imposed under section 76 is set aside. 4.4. Accordingly. we do not find any infirmity in the impugned orders, except the imposition of penalty under section 76, hence we pass the following order:- (1) The demand of service tax confirmed by the adjudicating authority is upheld along with penalty imposed under Section 76/78 and interest under Section 75. (ii) In appeal No.ST/11123/2018, simultaneous penalty imposed under Section 76 with reference to SCN No. DGCEI/AZU/12(4)124/2008-09 dated 22.10.2008 is set aside as discussed in Para 4.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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