2014 (3) TMI 565 - AT - Service Tax

Tribunal remands matter for re-consideration on exemption eligibility, directs deposit pending Appeal. Financial hardship considered.

The Tribunal remanded the matter for re-consideration to determine the eligibility of Notification No.12/2003-ST for exemption, directing the Applicant to ... Waiver of pre deposit - re-consideration of the stay order directing pre-deposit of 25% after the matter remanded by the High Court - Penalty u/s 78 – Work contract service - taxability prior to 1-7-2007 - Abatement of 67% - Waiver of pre-deposit - the main plank of argument advanced on behalf of the applicant that since there is a cross-fall-breach clause specifying that breach of one contract would also constitute breach of other contract, hence, both these contracts should be read together and accordingly the entire project being a turnkey project, the same is taxable as works contract only w.e.f. 1-7-2007 and not prior to that - High Court remanded matter back for fresh consideration - Held that:- it would be just and appropriate to direct the Applicant to deposit the offered amount of Rs.1.00 crore pending disposal of the Appeal. - stay granted partly. Issues:1. Eligibility of Notification No.12/2003-ST for exemption on the value of materials used in providing services of erectioning and commissioning.2. Financial hardship faced by the Applicant due to outstanding defaults.Analysis:Issue 1: Eligibility of Notification No.12/2003-ST for exemptionThe Tribunal had earlier directed the Applicant to deposit 25% of the Service Tax confirmed under Section 35F. The Applicant challenged this direction in a Writ Petition, which was allowed by the Calcutta High Court, remanding the matter for re-consideration. The Applicant argued that the eligibility of Notification No.12/2003-ST was not examined, which could exempt them from service tax liability. The Tribunal had considered the arguments and evidences on a prima facie basis and passed the Stay Order. The High Court remanded the matter for re-consideration in light of the eligibility of the said Notification. The Tribunal analyzed the facts and evidences, including the project divided into supply and service portions, and the abatement claimed under relevant Notifications. The Tribunal, following principles of exemption interpretation, directed the Applicant to deposit Rs.1.00 crore pending Appeal disposal, waiving 75% of the demand and 100% of the penalty, leaving final determination of eligibility to the exemption Notifications at the Appeal stage.Issue 2: Financial HardshipThe Applicant, facing severe financial problems due to defaults, argued against depositing the directed amount, offering to deposit Rs.1.00 crore after obtaining necessary instructions. The Tribunal acknowledged the financial difficulties but directed the deposit to be made within eight weeks, waiving the balance dues and staying recovery during the Appeal pendency. Both parties were allowed to move the Tribunal for early Appeal hearing after compliance with the deposit directive.This detailed analysis of the judgment highlights the considerations made by the Tribunal regarding the eligibility of exemption Notifications and the financial circumstances of the Applicant, leading to the decision to direct the deposit while waiving a significant portion of the demand and penalty.