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of <h1>Works Contract Service Eligible for Composition Scheme Despite Procedural Lapse Under Service Tax Rules</h1> <h3>M/s ACME Cleantech Solutions Pvt Ltd. (Earlier known as ACME Tele power Ltd) Versus Commissioner of Central Excise, Meerut-II</h3> M/s ACME Cleantech Solutions Pvt Ltd. (Earlier known as ACME Tele power Ltd) Versus Commissioner of Central Excise, Meerut-II - TMI ISSUES: Whether the services rendered fall under the category of 'Works Contract service' as defined under the relevant service tax laws.Whether the appellants are eligible to avail the composition scheme under 'Works Contract service' despite non-exercising of the option as prescribed under Rule 3(3) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007.Whether non-exercising of the option under the composition scheme is a condonable procedural lapse and whether such non-compliance disentitles the appellants from the substantial benefit of reduced tax liability.Whether the refund claim is maintainable without challenging or modifying the self-assessment made by the appellants in their ST-3 returns.Whether the availment of Cenvat credit on input services violates the condition under sub-rule (2) of Rule 3 of the Composition Scheme Rules, 2007. RULINGS / HOLDINGS: The services rendered by the appellants fall under the category of 'Works Contract service' as per the definition under Section 65(105)(zzzza), since the contract was indivisible and included transfer of property in goods along with erection, commissioning, or installation services.The appellants are eligible to avail the composition scheme under 'Works Contract service' despite non-exercising of the option prior to payment of service tax; such non-exercising is a 'mere procedural lapse' and does not 'take away the substantial benefit' due to the appellants.The non-filing of a formal option under Rule 3(3) is not fatal, especially since no specific format or application has been prescribed, and the payment of service tax at the composition rate in returns filed is sufficient compliance.The refund claim is maintainable even though the self-assessment was not challenged or modified, as the issue of non-challenge was not raised in the Show Cause Notice or adjudication proceedings and cannot be raised at this stage without violating principles of natural justice.The appellants did not violate sub-rule (2) of Rule 3 of the Composition Scheme Rules, 2007, as they availed Cenvat credit only on input services, which is not barred, and not on inputs or cess paid on inputs. RATIONALE: The Court applied the statutory definition of 'Works Contract service' under Section 65(105)(zzzza) and the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, particularly Rule 3, which prescribes conditions for availing the composition scheme.The Court relied on precedent decisions including International Metro Civil Contractors, Harsh Construction Pvt Ltd, Vaishno Associates, ABL Infrastructure Pvt Ltd, and Shree Balaji Warehouse, which distinguish between mandatory conditions and procedural requirements for composition schemes and hold that procedural lapses can be condoned without denying substantive benefits.The Court emphasized that the absence of a prescribed format or specific procedural mandate for exercising option under Rule 3(3) indicates legislative intent that such procedural non-compliance should not bar substantive benefits.The Court rejected the Revenue's reliance on decisions requiring challenge/modification of self-assessment for refund claims, noting that the issue was not part of the original proceedings and raising it at the appellate stage violates the principles of natural justice and audi alteram partem.The Court distinguished the Apex Court's strict interpretation of exemption notifications (Dilip Kumar & Company) from the present case, which concerns procedural compliance under Rules rather than eligibility for exemption.The Court applied principles from Mohinder Singh Gill v Chief Election Commissioner and subsequent Tribunal decisions that an order must be sustained on the grounds stated therein and cannot be supplemented by fresh reasons at a later stage.The Court noted that the appellants paid excess service tax inadvertently and did not recover the excess from customers, thereby negating the bar of unjust enrichment and entitling them to refund.
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