2016 (1) TMI 655 - AT - Service Tax

Tribunal rules in favor of appellant on tax issues, orders re-computation and hearing opportunity

M/s Larsen And Toubro Ltd. Versus Commissioner Of Service Tax, Delhi

The Tribunal set aside the demands related to the denial of abatement and the DMRC IT Park contract. For the demands concerning service tax on ... Service tax demand under Construction Service (CS) / Commercial or Industrial Construction Service (CICS) / Works Contract (WC) - abatement option seeked - interest and penalties confirmed - Held that:- The demand relating to denial of abatement on the ground that the value of material supplied free of cost by the service recipient was not included in the assessable value is set aside. The demand relating to DMRC IT Park contract is also set aside.As regards the demand relating to service tax on mobilisation advance and on account of denial of composition scheme, the appeal is allowed by way of remand for de novo adjudication and re- computation of demand on the basis of the principles laid down. Before de novo adjudication, the adjudicating authority shall give an opportunity to the appellant to be heard. Needless to say that the penalties will have to be re-adjusted in accordance with the demand so recomputed. Issues: Service tax demand under Construction Service, Commercial or Industrial Construction Service, Works Contract; Mobilisation advance; DMRC IT Park Contract Turnover; Rejection of Abatement option; Rejection of Composition Option.Analysis:1. Abatement Option Denial: The appellant contested the denial of abatement option under various notifications, arguing that the value of material supplied free of cost was not included in the assessable value. However, citing a CESTAT judgment, it was concluded that this component of demand is not sustainable, and the demand related to the denial of abatement was set aside.2. DMRC IT Park Contract: The demand related to the DMRC IT Park contract was challenged based on the execution date of the contract and the applicability of service tax. Referring to a Supreme Court judgment, it was established that works contracts were not liable to service tax before 01.06.2007. Consequently, the demand pertaining to the DMRC IT Park contract was also set aside.3. Mobilisation Advance: The issue of service tax on mobilisation advance was examined concerning the date of receipt and the applicability of service tax. The appellant argued that mobilisation advances received before 01.06.2007 for contracts executed prior to that date should not be liable to service tax. The Tribunal agreed with this contention, outlining specific scenarios for service tax liability based on contract execution dates and advance receipt dates.4. Denial of Composition Scheme: The demand arising from the denial of the composition scheme for paying service tax under works contract service was scrutinized. It was determined that for ongoing composite contracts where service tax was paid before 01.06.2007 and later under the composition scheme, the compositional scheme should be allowed. However, eligibility for the composition scheme was contingent on specific criteria, including the date of contract execution and the exercise of the composition scheme option.5. Final Order: The Tribunal set aside the demands related to the denial of abatement and the DMRC IT Park contract. For the demands concerning service tax on mobilisation advance and denial of the composition scheme, the appeal was allowed for a de novo adjudication and re-computation of the demand based on the principles outlined in the judgment. The adjudicating authority was directed to provide the appellant with a hearing opportunity before re-computation, with penalties to be adjusted accordingly.