2016 (6) TMI 775 - AT - Service Tax

Tribunal grants appeal, orders reevaluation of demand pre-2007, and penalty reassessment under Rule 2A.

The Tribunal allowed the appeal for de-novo adjudication, setting aside the demand pre-01.06.2007 and directing a recomputation of the demand for the ... Non-levy of service tax on works contracts prior to 01.06.2007 in view of L&T - Works Contract Service - Valuation under Service Tax (Determination of Value) Rules, 2006 - Rule 2A - Composition Scheme for works contracts - Abatement under Notification No.15/2004-ST / 1/2006-ST - Recomputation of demand and redetermination of penalty on remandNon-levy of service tax on works contracts prior to 01.06.2007 in view of L&T - Service tax demand for the period prior to 01.06.2007 is not sustainable. - HELD THAT: - The Tribunal, applying the decision in L&T, holds that services rendered under works contracts prior to 01.06.2007 do not attract service tax. Having considered contentions of both parties, the appellant's plea that no service tax is leviable for periods before 01.06.2007 was accepted and the demand insofar as it relates to that period was set aside. [Paras 4, 5]Demand for the period prior to 01.06.2007 is set aside.Valuation under Service Tax (Determination of Value) Rules, 2006 - Rule 2A - Composition Scheme for works contracts - Recomputation of demand and redetermination of penalty on remand - Demand for the period 01.06.2007 to 30.09.2007 to be recomputed under Rule 2A and adjudicated de novo, with opportunity to the appellant to be heard and penalty to be redetermined. - HELD THAT: - The Tribunal found that for services rendered w.e.f. 01.06.2007 the correct classification is Works Contract Service, and valuation for service tax must follow Rule 2A of the Service Tax (Determination of Value) Rules, 2006, unless the appellant had opted for the Composition Scheme (which the record shows was not done). As factual quantification (such as material cost percentages) and computation of tax and penalty remain disputed and were not satisfactorily evidenced before the Tribunal, the matter is remanded for de-novo adjudication so that the value of the impugned service is determined under Rule 2A, the appellant is heard, and the tax and penalty are recomputed in accordance with the submissions and applicable law. [Paras 4, 5]Demand for 01.06.2007 to 30.09.2007 to be recomputed under Rule 2A; appellant to be given hearing; penalty to be redetermined in light of recomputation and submissions.Final Conclusion: The appeal is allowed in part: demand prior to 01.06.2007 is quashed; the demand for 01.06.2007 to 30.09.2007 is remitted for de-novo adjudication to recompute tax under Rule 2A (unless composition scheme applies), with opportunity to the appellant to be heard and penalty to be redetermined accordingly. Issues:1. Service tax demand confirmation without allowing abatement under Notification No.15/2004-ST or 1/2006-ST.2. Applicability of service tax for works contracts prior to 01.06.2007 in light of the Hon'ble Supreme Court judgment.3. Cenvat credit reversal and service tax liability.4. Benefit of Composition Scheme for reducing service tax payable.5. Determination of service tax leviable under Rule 2A of the Service Tax (Determination of Value) Rules, 2006.6. Evidence requirement for material cost percentage in determining service tax liability.7. Sustainability of demand post-01.06.2007 under Works Contract Service classification.Analysis:1. The appellant contested the service tax demand confirmation citing non-allowance of abatement under Notification No.15/2004-ST or 1/2006-ST. The Tribunal noted the contentions and proceeded to address the issue.2. Regarding the applicability of service tax for works contracts before 01.06.2007, the Tribunal referred to the Hon'ble Supreme Court judgment in the L&T case. It ruled that no service tax is leviable for services rendered under works contracts pre-01.06.2007. This formed a crucial aspect of the decision-making process.3. The matter of cenvat credit reversal and service tax liability was raised by the appellant, emphasizing the already reversed credit and the absence of service tax liability up to 31.05.2007 based on the L&T judgment. The Tribunal took this into consideration while evaluating the overall tax liability.4. The appellant sought the benefit of the Composition Scheme to reduce the service tax payable amount. This request was analyzed by the Tribunal in conjunction with other aspects of the case.5. In determining the service tax leviable, the Tribunal referred to Rule 2A of the Service Tax (Determination of Value) Rules, 2006. This rule was crucial in calculating the correct service tax amount owed by the appellant.6. The need for evidence regarding the material cost percentage in determining service tax liability was highlighted during the proceedings. The Tribunal considered this requirement for accurate computation of the tax demand.7. Post-01.06.2007, the sustainability of the demand under the Works Contract Service classification was discussed. The Tribunal opined that the service rendered from this date onwards falls under this classification, necessitating a revaluation of the demand based on Rule 2A of the Service Tax Rules.In conclusion, the Tribunal allowed the appeal for a de-novo adjudication, setting aside the demand pre-01.06.2007 and directing a recomputation of the demand for the subsequent period based on Rule 2A. The appellant was granted an opportunity to be heard, and the penalty amount was to be redetermined accordingly.