TaxTMI 
TaxTMI 
2018 (1) TMI 491
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....ldings and parts thereof at its three manufacturing units located at (i) Pantnagar Uttarakhand (ii) Chennai Tamilnadu (ii) Kiccha Uttrakhand. The registration for Service Tax was for supply and erection of pre-fabricated/pre-engineered steel buildings and parts thereof. The goods manufactured are cleared from the place of manufacture on payment of Central Excise duty on which Cenvat credit was availed by the appellants. It appeared to Revenue that the appellant should have classified their service activity under Works Contract Service. It further appeared to Revenue that on classifying service under Works Contract Service appellants were not entitled to avail Cenvat credit on Central Excise duty paid on inputs. It was, therefore, examined by Revenue, the transactions entered into by the appellant from January, 2007 to March, 2012. During the said period appellant had classified the service under Commercial or Industrial Construction Service and paid Service Tax @10.30 or 10.36 as the case may be on the assessable value or Gross value which was arrived at by following the provisions of Section 67 of the Finance Act, 1994. The total Service Tax paid was Rs. 131,34,12,537/- (i.e. 131.....
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....sh in excess of the Service Tax assessed/determined by passing the inadmissible Cenvat credit to their recipients of taxable service should not be demanded under Section 73A of the Finance Act, 1994. Further there were proposals to recover interest and imposed penalties under Section 77 & 78 of the Finance Act, 1994 read with Rule 15(3) of Cenvat Credit Rules, 2004. 3. The said Show Cause Notice dated 23/10/2012, on contest, was adjudicated through Order-in-Original No. 78/Commissioner/Noida/2013-14 dated 28/03/2014, wherein all the demands were confirmed on all counts and in respect of the service, it was held to be classified under Works Contract Service. Aggrieved by the said order, the appellant preferred appeal before this Tribunal. The said appeal was decided through Final Order No. A/70073/2016 dated 18/11/2015 allowed the appeal of the appellant by way of remand and sent the matter for de-novo adjudication to the Commissioner, observing as under:- "Having considered the rival contentions, we find it fit and appropriate in the interest of justice set aside the impugned order and remand the issue to the Adjudicating Authority who shall re-determine the tax liability after ....
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....2006 or in terms of Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, and there was no provision for availment of Cenvat Credit of Central Excise duty paid on the construction materials (inputs) under the said Rules." In view of the said findings, he passed order as follows:- "1. I order to classify the impugned service of the assessee under the Works Contract Service in place of the Commercial or Industrial Construction Serviceexcept for the ongoing projects (as on 01.08.2007) mentioned in Annexure-B, as discussed supra in respect of SCN dated 23.10.2012, 22.05.2014, 27.10.2014 & SOD dated 23.10.2015. 2. I disallow the Cenvat credit of building/construction materials as alleged in SCN dated 23.10.2012 to the assessee amounting to Rs. 99,25,44,728/-(Rs.1,12,60,92,760/- (-) Rs. 13,35,48032/-) (Rupees Ninety Crores Twenty Five Lakhs Forty Fourt Thousand Seven Hundred Twenty Eight) (Including Cess & S.H. Edu. Cess) in terms of Rule 2(k) & 3(1) of the Cenvat Credit Rules, 2004. 3. I confirm the demand of Rs. 20,13,18,981/- [(Rs.22,37,01,811/- (-) Rs. 2,23,82,830/-) (Rupees Twenty Crores Thirteen Lakhs Eighteen Thousand Nine Hundred Eighty One only) (inc....
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.... only) (As per Annexure/Chart C & D to the SCN dated 22.05.2014)] upon the assessee being the amount collected in cash as Service Tax and adjusted materials in excess of the Service Tax assessed/determined in terms of provisions under Section 73A of the Finance Act, 1994. 10. I order to charge and recover the interest at appropriated rate(s) as applicable during the relevant periods under Section 73B & Section 75 of the Finance Act, 1994 from the assessee on the aforesaid adjudged amount as per Para 9 with reference to the SCN dated 22.05.2014. 11. I impose a penalty of Rs. 10,000/- (Rupees Ten Thousand only) upon the assessee under Section 77 of the Finance Act, 1994 for their various acts of omission and commission as mentioned in preceding Paras with reference to the SCN dated 22.05.2014. 12. I impose a penalty of Rs. 29,09,247/- (Rupees Twenty Nine Lakhs Nine Thousand Two hundred Forty Seven oly) upon the assessee equivalent to 10% of the dues adjudged under Para 9 amounting to Rs. 2,90,92,473/- under Section 76 of the Finance Act, 1994 read with Rule 15(1) of the Cenvat Credit Rules, 2004 for their various acts of omission and commission as mentioned in the preceding par....
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....at credit of building/construction materials as alleged in the SOD dated 23.10.2015 amounting to Rs. 36,81,836/- (Rupees Thirty Six Lakhs Eighty One Thousand Eight hundred and Thirty Six only) including Education Cess and Secondary & Higher Education Cess in terms of Rule 2(k) & 3(1) of the Cenvat Credit Rules, 2004 and order to recover the same from the assessee under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 73(1) of the Finance Act, 1994. 20. I hereby order to charge and recover the interest, at appropriate rate(s), as applicable from the assessee during the relevant periods, under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 75 of the Finance Act, 1994 on the aforesaid confirmed dues in Para 18 with reference to the SOD dated 23.10.2015. 21. I hereby confirm the demand of Rs. 53,59,408/- (Rupees Fifty Three Lakhs Fifty Nine Thousand Fourt Hundred and Eight only) upon the assessee, being the amount collected in cash as Service Tax and adjusted from the inadmissible Cenvat credit availed on construction/building materials in excess of the Service Tax assessed/determined in terms of provisions under Section 73A of the Finance Act, 1994 with refer....
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.... to its value, then such value shall in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provide by him.Therefore, the said provision which is fundamental in nature and is applicable to any taxable service. (v) The demand towards Cenvat credit confirmed in case of show cause notice dated 23.10.2012 is substantially time barred. (vi) In the impugned order, ld. Commissioner has distinguished the judgment of this Tribunal in the case of S. V. Jiwani (supra) and the grounds on which ld. Commissioner distinguished the judgment are invalid. 6. Heard the ld. Counsel for the appellant, who has submitted that the Original Authority has disallowed Cenvat credit demanded through Show Cause Notice dated 23/10/2012 & 22/05/2014 in terms of Rule 2(k) & 3(1) of Cenvat Credit Rules, 2004 and further submitted that there was no proposal in the said two Show Cause Notices to disallow the said Cenvat credit under the provisions of Rule 14 of the Cenvat Credit Rules, 2004 read with Section 73 of the Finance Act, 1994. The only provision for disallowing the Cenvat credit is provided under14....
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....nder Rule 14 of the Cenvat Credit Rules, 2004, therefore, the entire Cenvat credit paid on inputs was admissible to them. Once the Cenvat credit is found to be admissible, then the debit of the same will establish that no additional amount was recovered from their customers in the name of Service Tax and which was not deposited. Therefore, the demand Section 73A of the Finance Act, 1994 raised under all the Show Cause Notices become unsustainable. He further submitted that the demand of around Rs. 20 crores confirmed in the First Show Cause Notice was on account of forcibly applying option of Composition Scheme on the appellant and therefore, said demand is also not sustainable. He has further submitted that taking all the aspects into consideration, it is a very clear case that there was not loss to exchequer. He finally submitted that the Commissioner has unjustifiably distinguished the judgment in S.V. Jivanis case (supra) on the pretext that there was a Revenue loss caused by the appellant to the exchequer as no such case was made out by the Revenue at any stage nor any evidence suggesting the same is available on records. As regards the Commissioners reliance on the case of CC....
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....(SC)} has settled the law that works contract can be segregated into a contract of sale of goods and contract of provision of service. With a view to bring certainty and sim0plicity the manner of determination of value of service portion in works contracts has been provided in Rule 2A of the Service Tax (Determination of Value) Rules, 2006. The Government did not want to levy tax on the goods portion of the services which involved both the supply of goods and service parts as that would amount to transgressing on the legislative powers of the state and therefore, provided certain exemption based on percentage of the gross amount charged vide 12/2003-ST dated 20/06/2003 which exempted the value of goods and materials sold from the value of the total amount charged for the service, subject to the condition that there is documentary proof specifically indicating the value of the said goods and materials, 15/2004-ST that exempted tax from the portion that was in excess of 33% of the tax determined on the gross amount charged and later a mega Notification No.1/2006-ST dated 01/03/2006. CBEC also specified vide Circular No.81/16/2007-TRU dated 22/05/2007 as to when the Erection, Commissi....
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.... contentions and on perusal of the facts on record, we find that the entire case of Revenue is based on the provisions under Rule 2A of Service Tax (Determination of Value) Rules, 2006 and Composition Scheme in respect of Works Contract Service. It is the contention of the Revenue that after 01.06.2007, the services of the appellant were appropriately classifiable under works contract service only in terms of Section 65 (105) (zzzza) of the Finance Act, 1994 and that the appellant had only two options for valuation of its service and that is, either Rule 2A of Valuation Rules, 2006 of under the composition Scheme and in either of these options, Cenvat credit on inputs is not admissible to the appellant. We find that the appellant has contested this claim of the Revenue for reclassification of their services on 01.06.2007. We however abserve that even if the services of the appellant are considered as classifiable under works contract servicesafter 1st June, 2007, as claimed by the Revenue, the further claims of the Revenue that there were only two options as above for valuation of works contract service available to the appellant and consequential non-admissibility of Cenvat credit....
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....and without any basis. We find that in the show cause notices, the Department has not made out any such case of the alleged revenue loss against the appellant. The Commissioners impugned order also does not explain as to in what manner such loss is caused by the appellant. We also find that Revenue did not contest applicability of Final Order in the case of M/s S. V. Jiwani in the present case. We also find that it was held in the said case, that in case of Works Contract Service also assessment can be done under the provisions of Section 67 of the Finance Act, 1994 and that valuation methods prescribed under Rule 2A or composition scheme are merely options provided to the assessee. Once this is the legal position, the benefit of Cenvat credit on inputs cannot be denied to the appellants in the absence of any specific bar or prohibition in the Cenvat Credit Rules, 2004 or the Finance Act, 1994 or the rules made there under. We do not find any such restriction or prohibition nor the ld. D.R. has been able to show any such restriction to us. We find that in the present case, assessments were done by the appellant in accordance with the provisions of Sub-section (1) of Section 67 of t....
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.... of services as per the provisions of Rule 2A of Service Tax (Determination of Value) Rules, 2006 and or Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. 10. In our considered view, the entire issue is misconceived by the Adjudicating Authority for more than one reason. 11. Firstly, the appellant entered into works contract service and Service Tax liability on such works contract needs to be discharged based on reading of Section 67 of Finance Act, 1994. In order to appreciate the said provisions we reproduce Section 67 which reads as under : 67. Valuation of taxable services for charging service tax. - (1) Subject to the provisions of this Chapter, where service tax is chargeable on any taxable service with reference to its value, then such value shall, - (i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money as, with the addition of service tax charged, is equivalent to the considerat....
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....for discharge of Service Tax liability needs to be determined by referring to Service Tax Valuation Rules. In the case in hand since there is no dispute as to the gross value charged by the appellant there is no necessity to take recourse for determining the value under Service Tax (Determination of Value) Rules, 2006. 13. Secondly, we find strong force in the contentions as raised by the Counsel as to applicability of the provisions of Rule 2A of the Service Tax (Determination of Value) Rules, 2006. We find that the said rule starts with the expression subject to the provisions of Section 67 means that value of the services, involved in execution of works contract if cannot be determined under said section, then only the said provisions of Rule 2A would apply and shall be determined in the manner as is indicated therein. In our considered view, this rule will not be applicable to the case in hand. 14. Thirdly, we find that the adjudicating authority and assertion of departmental representative, that the appellant being a person and having provided works contract services should have discharged the Service Tax liability under Works Contract (Composite Scheme for Payment of Serv....
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....der these rules shall exercise such option in respect of a works contract prior to payment of service tax in respect of the said works contract and the option so exercised shall be applicable for the entire works contract and shall not be withdrawn until the completion of the said works contract. 16. It is pertinent to note that the said Rule 3(1) of Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 if read carefully would indicate that the service provider in relation to works contract service has an option to discharge Service Tax liability in respect of works contract services in the manner prescribed therein. If there is an option which needs to be exercised and if an assessee chooses not to exercise such an option of discharge of Service Tax liability under Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 then only meaning that can be attributed will be that the service provider or an assessee has to discharge the Service Tax liability at the full rate. We are fortified in this view, by Apex Court in the case of Chandavarkar Sita Ratna Rao v. Ashalata S. Guram (supra), We also find that larger Bench of the Tribunal in the ca....