https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=769273 https://www.taxtmi.com/caselaws?id=769273 Classification of services - management, maintenance or repair service or Commercial or Industrial Construction Service? - classification of services rendered post 01.07.2012 as 'works contract service' by the appellant - scope of SCN - extended period fo limitation. Whether the services provided by the appellant during the period prior to 30.06.2012 are correctly classifiable as 'management, maintenance or repair service' or as 'Commercial or Industrial Construction Service' (CICS) for the purpose of service tax levy and abatement? - HELD THAT:- With effect from 01.07.2012, the Appellant classified the services in question as 'Works Contract ' Service and accordingly was discharging service tax. For the period post 01.07.2012, it has been alleged that the classification of the subject transaction as 'works contract' is incorrect inasmuch as the Appellant failed to submit any documentary evidence to substantiate discharge of VAT on the value of goods involved in the execution of goods. For the period post July 2012, even when the adjudicating authority accepted that the underlying agreements qualifies as 'works contract services', he has held that the valuation adopted by the Appellant in terms of Rule 2(A)(ii) of Service Tax Valuation Rules is incorrect since the Appellant is able to determine the value of VAT payable. Accordingly, it was held that the Appellant ought to have adopted Rule 2(A)(i), for determination of value of services. Whether the classification of services rendered post 01.07.2012 as 'works contract service' by the appellant is correct? - HELD THAT:- Reliance placed on the decision in the case of Gainwell Commosales Pvt. Ltd. v. CCE & ST, Ranchi [2023 (6) TMI 1308 - CESTAT KOLKATA], wherein this Tribunal has held that if a contract involves supply of goods as well services prior to 01.07.2012, then such composite contract cannot be classified under management maintenance or repair 'service. It has been held that such contracts would more appropriately be classifiable under works contact service and thus, demand under management maintenance or repair 'service was set aside. The demand of service tax confirmed in the impugned order for the period prior to 30.06.2012 under the category of 'management maintenance or repair' service is not sustainable. Accordingly, the appellant has rightly classified the said service under the category of 'Commercial or Industrial Construction Service' (CICS) and claimed abatement in terms of Sl. No. 10 of Notification No. 01/2006-ST dated 01.03.2006. Scope of SCN - Demand of service tax confirmed for the period from period from July 2012 to September 2014 - HELD THAT:- The Ld. Commissioner has travelled beyond the scope of the Show Cause Notice and confirmed the demand on a ground which is not raised in the Notice. It is observed that nowhere in the Show Cause Notice was there any allegation or proposal with respect to the valuation of such services under Rule 2(A) of the Service Tax Valuation Rules. Once the allegation in the Show Cause Notice regarding the classification of the services in question has been decided, the Ld. Commissioner cannot travel beyond the proposals in the Show Cause Notice and confirm the demand. It is a settled principle of law and has been held in a number of decisions that when an order goes beyond the allegations mentioned in the Show Cause Notice, such order is violative of the principles of natural justice. Accordingly, the demand confirmed post June 2012, up to September 2014, is liable to be set aside on this ground alone. Valuation of works contract under Rule 2A(ii)(c) of the Valuation Rules - HELD THAT:- Regarding the method of valuation adopted by the Appellant, we observe that as per the agreement between the Appellant and TSL, the Appellant is required to raise its invoice for the composite service at the beginning of each month based on agreed contract value. Hence, material requirements and details of such procurement is not known to the Appellant at the time of raising of invoice. Consequently, it is impractical to compute service portion of the contract in terms of Rule 2(A)(i) of the Valuation Rules since value of goods used toward rendering of services is not known at the time raising the invoice. In view of the above, the valuation cannot be done as per Rule 2A(i) of the Valuation Rules. Rule 2A provides two methods of valuing the works contract service and entails a right upon the assessee to choose any method of valuation of works contract. Thus, it is at the discretion of the Appellant to choose the method of valuation as per their contract and convenience. Since the Appellant had not entered into the contract with intention of valuing the service and material elements separately, hence, the Appellant chose to determine value of goods under Rule 2(A)(ii), as it provides for a simplified and specific method of computation - the method of valuation adopted by the appellant as per rule 2(A)(ii) is in order. Accordingly, the demand confirmed in the impugned order on account of valuation of works contract by adopting Rule 2(A(i) of the Valuation Rules, is not sustainable. Since the demand itself is not sustainable, the question of demanding interest and imposing penalties in the impugned orders does not arise. Extended period of limitation - HELD THAT:- The present demands have been raised based on the information obtained from ST-3 returns and other documents submitted by the Appellant. In this case, the Department has failed to bring in any evidence to allege suppression of fact with intention to evade the tax. In the absence of any suppression of facts on the part of the appellant, the extended period of limitation is not invokable. Accordingly, the demand confirmed for the extended period is liable to be set aside on the ground of limitation. Conclusion - i) The demand of service tax confirmed under the category of management, maintenance or repair Service' for the period prior to 30.06.2012, is not sustainable. The services rendered by the appellant for the period from 2009-10 up to 30.06.2012 is rightly classifiable under the category of 'Commercial or Industrial Construction Service' (CICS), as classified by the appellant and the appellant are eligible for the abatement in terms of Sl. No. 10 of Notification No. 01/2006-ST dated 01.03.2006. ii) For the period post 01.07.2012, the service rendered by the appellant is rightly classifiable as 'works contract service'. The demand of service tax confirmed in the impugned order by adopting Rule 2(A)(i) of the Valuation Rules is not sustainable and hence we set aside the same. The appellant has correctly opted for Rule 2(A)(ii) of Valuation Rules to discharge service tax on the works contract services rendered by them. iii) The demand confirmed by invoking the extended period of limitation is not sustainable. iv) No penalty is imposable on the appellant in the facts and circumstances of the case. Appeal allowed. Case-Laws Service Tax Mon, 11 Nov 2024 00:00:00 +0530