Tribunal rules in favor of appellant: Extended limitation period not valid, composition scheme allowed

The Tribunal ruled in favor of the appellant on both issues. It held that the extended period of limitation for the show cause notice was not valid as there was no deliberate evasion of service tax by the appellant. Additionally, the appellant was allowed to avail the composition scheme for payment of service tax, with penalties waived and consequential benefits granted.

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Issues involved:
1. Invocation of extended period of limitation for issuance of show cause notice.
2. Entitlement of the appellant to avail the composition scheme.

Analysis:

Issue 1: Invocation of extended period of limitation for issuance of show cause notice
The appellant, a construction business, was registered with the Service tax department and paying service tax under a specific category. During an audit in 2013, the department contended that the services provided fell under a different category, leading to the issuance of a show cause notice demanding service tax. The appellant argued that the demand for the period from 01.04.2008 to 30.09.2012 was time-barred as they had been paying taxes regularly under a different category. The Tribunal noted that the Revenue had consistently taken the position that different elements of work/service in a composite contract could be taxed under various classifications. However, the Supreme Court had ruled that prior to 01.06.2007, there was no legislative competence to tax composite services under different classifications. As the show cause notice was issued before this Supreme Court decision, the Tribunal held that there was no deliberate evasion of service tax by the appellant. The Tribunal also observed that the appellant was registered, filing returns, and paying taxes regularly, indicating no intent to evade payment.

Issue 2: Entitlement of the appellant to avail the composition scheme
The appellant contended that they were wrongly denied the option to pay service tax at a lower rate under the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. The Tribunal referred to a precedent decision and held that in cases where the activity is eligible for classification under Works Contract Service after a certain date, the appellant should be given the opportunity to pay tax under the composition scheme. Therefore, the Tribunal ruled in favor of the appellant, allowing them to avail the composite scheme for the relevant period. The appellant was directed to verify the tax calculation and pay any discrepancies found. Consequently, the penalty was waived, and the appeal was allowed with the appellant receiving consequential benefits in accordance with the law.

In conclusion, the Tribunal found in favor of the appellant on both issues, ruling that the extended period of limitation for the show cause notice was not valid and allowing the appellant to avail the composition scheme for payment of service tax.

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