2013 (1) TMI 464 - AT - Service Tax

Tribunal grants waiver of predeposit & stays collection in service tax dispute

The Tribunal granted waiver of predeposit of dues and stayed the collection of differential service tax during the appeal for the appellants in a case ... Works Contract Service - Section 65(105)(zzzza)- Whether Rule 3(3) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 will apply to a situation where an assessee is wanting to switch over to a new scheme - business of supply and installation of electrical transmission towers - Erection and Commissioning - Section 65(105)(zzd) - Revenue argued that new scheme applicable only in respect of a new contract commencing after 1.6.2007 and for old contract for which they were paying service tax under 'Erectioning and Commissioning', they cannot avail the benefit of the new scheme - Held that:- It would appear that Rule 3(3) of the said Rules prohibits switching from works contract scheme to the other applicable entries during the currency of the contract. Following the decision in case of ABB Ltd. (2010 (12) TMI 147 - CESTAT, BANGALORE) to the effect that prior to 1.6.2007 no service tax was payable on such contracts. Keeping these aspects in view, we grant waiver of predeposit of dues. In favour of assessee Issues:1. Classification of services for service tax payment under different categories.2. Applicability of Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007.3. Benefit of new entry for works contract from 1.6.2007.4. Interpretation of Rule 3(3) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007.Classification of services for service tax payment under different categories:The case involved a dispute regarding the classification of services for service tax payment by the appellants. The Revenue contended that the appellants could not switch over to a new classification for the same contract from 1.6.2007, resulting in a demand for differential service tax. The appellants argued that they were paying service tax even before 1.6.2007 and should be eligible for the benefit of the new entry from that date. The Tribunal considered the arguments and granted waiver of predeposit of dues for the admission of the appeal, staying the collection of dues during the appeal.Applicability of Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007:The Revenue opposed the appellants' claim, stating that the new scheme under the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, could only be applied to new contracts commencing after 1.6.2007. They argued that for old contracts where service tax was paid under a different category, the benefit of the new scheme could not be availed. The Revenue relied on Circular No. 128/10/2010-ST to support their position. The Tribunal noted the debatable issue of applying Rule 3(3) of the said Rules to situations where an assessee wanted to switch to a new scheme. Considering the arguments and precedents, the Tribunal granted waiver of predeposit of dues and stayed the collection during the appeal.Benefit of new entry for works contract from 1.6.2007:The appellants contended that they had paid service tax as per the provisions of the new entry from 1.6.2007 when it came into force. They argued that the demand for differential tax was not justifiable as they believed they were eligible for the benefit of the new entry from that date. The Tribunal considered this argument along with the interpretation of Rule 3(3) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, and granted the waiver of predeposit of dues for the appeal.Interpretation of Rule 3(3) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007:The Tribunal deliberated on the interpretation of Rule 3(3) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, which prohibits switching from works contract scheme to other applicable entries during the currency of the contract. The Tribunal considered the arguments from both sides, the decision in the case of ABB Ltd., and the debatable nature of applying Rule 3(3) to switching to a new scheme. Ultimately, the Tribunal granted waiver of predeposit of dues and stayed the collection during the pendency of the appeal, taking into account the various aspects and precedents discussed.