Tribunal Allows Abatement in Works Contract Service Assessment

The Tribunal set aside the order denying abatement under Notification No. 1/2006 and allowed abatement. The matter of assessment under Works Contract service was remanded to the adjudicating authority for further action.

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Issues involved:
Challenge to order-in-original regarding service tax demand, denial of abatement under Notification No. 1/2006, denial of benefit under Works Contract (Composition Scheme).

Analysis:
1. Challenge to order-in-original regarding service tax demand:
The appellant, a manufacturer of transformers and electrical switchgear, faced allegations of not paying service tax while claiming ineligible abatement under Notification No. 1/2006. After investigation and issuance of show cause notice, the impugned order confirmed a service tax demand of &8377; 4,69,31,742 along with penalties. The appellant challenged this order, leading to the present appeal.

2. Denial of abatement under Notification No. 1/2006:
The appellant had contracts involving supply, erection, commissioning, and civil works. The Revenue disallowed abatement under Notification No. 1/2006 on the grounds that the gross amounts of certain contracts did not include the entire cost of plant, equipment, and materials used. However, the Tribunal found that the appellant was entitled to abatement under Sl. No. 7 of the Notification for contracts involving commercial or industrial construction services, which include supply of materials like cement and steel.

3. Denial of benefit under Works Contract (Composition Scheme):
Regarding the benefit under the Works Contract (Composition Scheme), the Revenue denied it because the appellant did not exercise the option for payment of service tax under the scheme before payment. The Tribunal acknowledged this but directed the adjudicating authority to allow assessment under Works Contract service for relevant contracts, with payment of service tax only on the value of the service portion, subject to satisfactory proof of the value of service.

In conclusion, the Tribunal set aside the order denying abatement under Notification No. 1/2006 and allowed abatement. The matter of assessment under Works Contract service was remanded to the adjudicating authority for further action.

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