2015 (2) TMI 801 - AT - Service Tax

Tribunal Sets Aside Service Tax Demands, Emphasizes Procedural Compliance

M/s. ABL Infrastructure Pvt. Ltd. Versus Commissioner of Central Excise, Nashik

The Tribunal allowed the appeal, setting aside the demands of Service Tax and granting consequential relief in accordance with the law. The judgment ... Commercial or Industrial Construction Service - Works Contract Service - Change of contract from old contract to new contract is only an amendment with the same object i.e. construction of City Centre Mall - Works Contract (Compositon Scheme for payment of Service Tax) Rule, 2007. Held that:- It is apparent that two contracts are different in factual details. The clauses relating to Retention money and Mobilization advances are very significant clauses in such type of Agreements. In the present case, these two clauses are quite different in the earlier Contract and the later Contract. Further evidence has been provided by the appellant in the form of Ledger abstract showing payment made to the appellant by M/s City Centre Mall Pvt. Ltd., Nashik. The Ledger abstract clearly indicated that the payments are differentiated as under the old contract and the new contract. Therefore, we arrive at the conclusion that the old contract was terminated w.e.f. 31.5.2007 and a fresh contract was executed w.e.f. 5.6.2007. Having stated that the fresh contract from 5.6.2007 is to be considered as a new contract, there cannot be any objection to classify the service rendered in this contract as a Works Contract Service, which was introduced w.e.f. 1.6.2007. The provider who opts to pay tax under the Rule shall exercise such option prior to payment of Service Tax. We find force in the appellant's contention that the fact that they had started paying tax under the Works Contract Composition Scheme is quite evident from the rate of tax reflected in the ST-3 returns. In any case, they had exercised option on 26.9.2007, the substantial benefit cannot be denied for procedural deficiency of delay in opting for Works Contract Service by a specific declaration under Rule 3. More so, when no format has been prescribed for making/exercising an option nor has it been specified as to whom the option must be addressed. Reliance is placed on the case of Bridge and Roof Company [2012 (6) TMI 491 - CESTAT, NEW DELHI] - Decided in favour of appellant. Issues Involved:1. Classification of service under Commercial or Industrial Construction Service versus Works Contract Service.2. Validity of termination and re-award of the contract.3. Eligibility for Works Contract (Composition Scheme) for payment of Service Tax.4. Limitation and penalties under Sections 76 and 78 of the Finance Act, 1994.Detailed Analysis:1. Classification of Service:The primary issue was whether the appellant could change the classification of their service from 'Commercial or Industrial Construction Service' to 'Works Contract Service' for the same work undertaken, i.e., construction of City Centre Mall. The appellant argued that after the introduction of Works Contract Service, they were legally entitled to classify their activity under this more specific service. The Revenue contended that the change of classification was not permissible as the service was the same before and after 1.6.2007. The Tribunal concluded that the services provided under the new contract starting from 5.6.2007 could be classified as Works Contract Service, as it was a fresh contract and not a continuation of the previous one.2. Validity of Termination and Re-award of the Contract:The appellant provided detailed documentation to prove that the original contract was validly terminated due to disputes and delays, and a new contract was awarded through a competitive bidding process. The Tribunal reviewed the minutes of the meetings, tender invitations, comparative statements of bidders, and ledger abstracts, concluding that the termination and re-award of the contract were genuine and not a cover-up. The Tribunal noted significant differences between the old and new contracts, including contract value, retention money, mobilization advance, and other terms, establishing that they were indeed separate contracts.3. Eligibility for Works Contract (Composition Scheme) for Payment of Service Tax:The appellant argued that by paying Service Tax under the Works Contract Composition Scheme, they had effectively exercised their option as required under Rule 3 of the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007. The Tribunal found that the appellant had started paying tax under the Works Contract Composition Scheme, as evidenced by the rate of tax reflected in their ST-3 returns. The Tribunal held that the substantial benefit could not be denied due to procedural deficiencies, especially when no specific format for exercising the option was prescribed. The Tribunal relied on the case of Bridge & Roof Co. (India) Ltd., which supported the appellant's contention.4. Limitation and Penalties:The appellant contended that the show-cause notice for the period June 2007 to March 2008 was time-barred as they had obtained registration under Works Contract Service and were paying duty correctly under the Composition Scheme. The Tribunal, having set aside the demands of Service Tax on the grounds of valid classification under Works Contract Service, did not find it necessary to delve into the aspect of limitation and penalties under Sections 76 and 78 of the Finance Act, 1994.Conclusion:The Tribunal allowed the appeal, setting aside the demands of Service Tax and granting consequential relief in accordance with the law. The judgment emphasized the importance of genuine contractual changes and procedural compliance in determining the correct classification and tax liabilities.