Tribunal deems service tax calculation on total turnover illegal, directs recalculation

The Tribunal found the lower court's calculation of service tax liability on 100% of the turnover to be illegal. It highlighted relevant notifications and laws, stating that service tax should only apply to the service component of works contracts. The Tribunal allowed the appeal, directing the appellant to recalculate the service tax payable and submit a calculation sheet to the assessing officer. Penalties imposed were nullified, and no interest was deemed payable. The appeal was allowed, and the order was pronounced in open court.

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Issues involved: Calculation of correct service tax liability for works contract service, denial of adjustment for excess paid tax in the first half of the Financial Year 2015-16.

Analysis:
The issue in this case revolves around the correct computation of service tax liability for a taxpayer engaged in Civil Construction of buildings under the works contract service. The appellant had paid service tax on 100% of the gross value without availing abatement for the material component during Financial Years 2013-14, 2014-15, and the first half of 2015-16. The Revenue issued a Show Cause Notice for the second half of 2015-16 based on information from the Income Tax Department. The appellant, citing a medical condition, requested a re-calculation allowing abatement and credit for the excess tax paid. However, the Assistant Commissioner calculated the service tax on 100% of the gross value, raising a demand and imposing penalties under sections 78 and 77.

Upon appeal, the Commissioner (Appeals) upheld the adjudication order, leading the appellant to challenge the decision before the Tribunal. The Tribunal, upon review, found the lower court's calculation of service tax liability on 100% of the turnover to be illegal and contrary to the law. The Tribunal highlighted Notification No.24/2012-ST and section 65(105)(zzzza), emphasizing that service tax should only apply to the service component of works contracts. Consequently, the Tribunal allowed the appeal, setting aside the impugned orders.

The Tribunal directed the appellant to calculate the service tax payable under the rules and submit a calculation sheet to the assessing officer. Any remaining payable amount was to be settled by the appellant, with no interest deemed payable under the circumstances. The Tribunal also nullified the penalties imposed, ultimately allowing the appeal and pronouncing the order in the open court.

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