TaxTMI 
TaxTMI 
2020 (12) TMI 282
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....assessees had availed CENVAT credit on the duty paid on the inputs namely vulcanized rubber etc. and also on the service tax paid on input services and had utilized the same towards payment of service tax for the taxable services provided by them. The officers were of the opinion that with effect from 1.7.2012, the activity would fall under works contract service. Further, that the assessee was discharging service tax on the gross amount received by them. In doing so, the assessee included the value of consumables / goods used for providing service. It appeared to the department that the services being under the category of works contract service, the assessee is barred from taking CENVAT credit on inputs and ought to have determined the value for payment of service tax as per Rule 2A(ii)(B) of Service Tax (Determination of Value) Rules 2006 thereby not including the value of consumables / goods. The assessee had thus not only wrongly availed CENVAT credit but also did not discharge the correct amount of service tax on the taxable service provided by them. Show Cause Notices were issued for different periods alleging the above, proposing to classify the activity as works contract s....
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....os. Details of Show Cause Notice Period Involved ST/41437/2015 S. No. 78/2014 JC (ST) dated 24.9.2014 July 2012 to March 2013 / April 2013 to March 2014 ST/41996/2017 Sl. No. 78/2014 JC (ST) dated 24.9.2014 April 2014 to Jul 2015 ST/41056/2015 S. No. 08/2017-ST-COMMR-TRY dated 9.11.2017 July 2012 to March 2016 ST/41129/2018 S. No. 12/2016/COMMR-MDU dated 14.12.2016 July 2012 to Sep. 2015 ST/41985/2018 (Deptt. Appeal) S. No. 8/2017-ST-COMMR-TRY dated 9.11.2017 July 2012 to March 2016 5.1 On behalf of the assessee ld. Counsel Shri S. Muthu Venkataraman appeared and argued the matter. It is submitted by him that while providing service of retreading of tyres, the assessee utilized inputs in the nature of tread rubber, vulcanizing rubber etc. They availed CENVAT credit of duty paid on such inputs and discharged the service tax on the gross value as under section 67(1) of the Finance Act, 1994. The service tax was paid in cash and also adjusted from CENVAT credit. The department is of the view that the assessee has to discharge service tax liability determining the ....
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....able to the assessee is clear on reading Rule 2A. 5.4 Rule 2A starts with the wordings 'subject to the provisions of section 67 ....' which would mean that this Rule is subject to section 67 and does not take away the right to pay service tax under section 67. The assessee has option to choose the value determined either under section 67 of the Finance Act or determine value under Rule 2A(ii)(B) of Service Tax (Determination of Value) Rules 2006. Section 67 of the Finance Act 1994 does not have any condition in regard to availment of CENVAT credit on inputs used in providing output service. Whereas Rule 2A imposes a bar to avail credit. The department cannot thrust upon the assessee the valuation method under Rule 2A(ii)(B) of Service Tax (Determination of Value) Rules 2006 when assessee has opted to pay service tax under section 67 on the gross amount charged. The Valuation Rules cannot override section 67 and in case of conflict between Act and Rules, the Act will prevail. 5.5 To support his argument that payment of service tax for WCS under section 67 on gross amount charged is correct, he relied upon the decision of the Tribunal in the case of S.V.....
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....s follows:- S. No. Particulars July 12 to Mar 13 April 13 to Mar 14 April 14 to May 15 June 15 to Oct. 15 Nov. 15 to Mar16 Total 1. Service tax liability paid by our company (Ref. 1 below) in terms of sec. 67 of the Act 5867539 7331697 8277777 4697576 4732657 30907246 2. Service tax liability calculated by adopting valuation as per Rule 2A(i) (Ref. 2 below 4061405 5870063 6429566 3493408 3128910 22983353 3. Additional service tax paid by us in comparison with valuation as per Rule 2A(i) (1 - 2) 1806134 1461633 1848211 1204168 1603747 7923894 S. No. Particulars Jul 12 to Mar 13 Apr 13 to Mar 14 Apr 14 to May 15 June 15 to Oct 15 Nov 15 to Mar 16 Total 1. Actual service tax paid details In cash 5662803 6967708 7797357 4424992 4522299 29375159 Inpu....
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....and the penalties imposed cannot sustain. He prayed that the appeals filed by the assessee may be allowed. The department appeal may be dismissed. 6. The ld. AR Smt. Sridevi and Shri Arul C. Durairaj appeared and argued on behalf of the department. The summary of written submissions is as under:- 6.1 As far as the classification of the retreading activity is concerned, it is submitted that the issue is no longer res integra and has been settled by the Hon'ble Supreme Court of India in the case of Safety Retreading Co. Pvt. Ltd. reported in 2017 (48) STR 97 that the activity in question would be a works contract. The question to be addressed in these appeals is whether a works contract can be assessed with reference to section 67 of the Finance Act, 1994 without recourse to Rule 2A of the Service Tax (Determination of Value Rules) 2006 which specifically deals with valuation of service portion of a works contract. The Hon'ble Supreme Court in the case of Safety Retreading Co. Pvt. Ltd. supra in para 10 of the judgment has held as follows:- "The finding of the appellate Tribunal that it is the entire of the gross value of the service rendered that is ....
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.... Credit Paid in cash 70% of gross value Tax payable ST/41437/2015 4,45,42,073 21,66,647 1,80,496 19,86,151 3,11,79,451 38,53,780 18,67,629 6,25,98,864 33,05,941 1,08,998 31,96,943 4,38,19,205 54,16,054 22,19,111 ST/41996/2017 9,07,06,341 51,15,711 3,28,490 47,87,221 6,34,94,439 80,24,820 32,37,599 ST/41056/2018 52,78,47,046 6,76,62,202 3,82,87,043 2,93,75,159 36,94,92,932 4,72,67,922 1,78,92,763 ST/41129/2018 25,93,55,786 3,25,22,032 1,92,20,822 1,33,01,210 18,15,49,050 2,27,65,878 94,64,668 6.5 He prayed that the appeals filed by the assessee may be dismissed. Appeal No. ST/41985/2018 filed by the department with regard to wrong availment of CENVAT credit may be allowed 7. We have heard the arguments of both sides and perused the records. 8.1 Though the assessee had taken registration only under maintenance and repair service and there is detailed discussion in the orders by ....
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....rvice 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 consideration; (iii) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner. (2) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged. (3) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service.&n....
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....hile providing the works contract service which may always not be easy to segregate. Service tax (Determination of Value) Rules, 2006 would help to determine the value of service portion in the execution of works contract. Rule 2A of the said Rules reads as under:- "2A. Determination of value of service portion in the execution of a works contract.- Subject to the provisions of section 67, the value of service portion in the execution of a works contract , referred to in clause (h) of section 66E of the Act, shall be determined in the following manner, namely:- (i) Value of service portion in the execution of a works contract shall be equivalent to the gross amount charged for the works contract less the value of property in goods transferred in the execution of the said works contract. Explanation.- For the purposes of this clause,- (a) gross amount charged for the works contract shall not include value added tax or sales tax, as the case may be, paid or payable, if any, on transfer of property in goods involved in the execution of the said works contract; (b) value of works contract se....
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....nation 1. - For the purposes of this rule,- (a) "original works" means- (i) all new constructions; (ii) all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable; (iii) erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise; (i) maintenance or repair or reconditioning or restoration or servicing of any goods; or (ii) maintenance or repair or completion and finishing services such as glazing or plastering or floor and wall tilling or installation of electrical fitting of immovable property, Service tax shall be payable on seventy per cent of the total amount charged for the works contract. (d) "total amount" means the sum total of the gross amount charged for the works contract and the fair market value of all goods and services supplied in or in relation to the execution of the works contract, whether or not supplied under the same contract or any other contract, after deducting- (i) the amount charge....
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.... on the question framed, whether input service credit could have been availed without exercising the options provided in Rule 2A of the Service Tax (Determination of Values) Rules, 2006 or whether CENVAT credit can be claimed after discharging the liability in full, that having paid the service tax in full, Revenue is not incurring any loss of revenue, hence the Court should not undertake an academic exercise. 3.2 In the matter the issue that was examined by the Hon'ble Court was that, whether input service credit could have been availed without exercising the options provided in Rule 2A of the Service Tax (Determination of Values) Rules, 2006 after having discharged the tax liability in full. It was held by the Hon'ble Court that that having paid the service tax in full, Revenue has not incurred any loss of revenue hence Court should not undertake an academic exercise." 8.8 By judicial discipline, we are bound to follow the decisions of the Tribunal and also accepted by the Department. Needless to say that Circular issued by department is binding on them. 8.9 The ld. AR Shri Arul C. Durairaj has made a strong effort to argue that the as....