TaxTMI 
TaxTMI 
2019 (7) TMI 1793
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....Scheme for payment of Service Tax) Rules, 2007 [Composition Scheme]. (ii) Sub-contractor services rendered to main contractors: In these cases, the Appellant did not discharge any service tax under a bona fide belief that the full tax liability had been discharged by the main contractor; (iii) Construction of married accommodation for DGMA: No service tax paid (iv) Construction of quarters for staff: No service Tax paid (v) Renting of immovable property: No service tax paid 4. The details of the Service Tax short paid/not paid by the Appellant as claimed by the Department are contained in the following Chart: S.No Taxable value Service provided Service Tax Payable Service Tax Paid Short paid Service Tax (in Rupees) (in Rupees) (in Rupees) (in Rupees) 1. 108815496 WCS 12614458 3976814 8637644 2. 15255127 CCS 1873754 0 1873754 3. 109149545 CCS 13075527 0 13045527 4. 9197898 CCS 1013900 0 1013900 5. 8639634 CCS 1115057 406393 708664 6. 45000 RIP 5568 0 5562 7. 251102700 29698257 4383207 25315050 5. The findings of the Commissioner in the impugned order with the specific category of servi....
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...., it has been submitted that construction of Suratgarh Super Thermal Power Station for Indure Private Limited; civil construction work as a sub-contractor for Indure Private Limited, Tata Projects and others; construction of married accommodation for Director General Married Accommodation [DGMA] or residential quarters for ABB Limited or construction for FM Limited are in the nature of composite contracts involving supply of goods/ materials during the execution of civil construction and, therefore, are not classifiable under any of the category of services prior to 1 June 2007 as held by the Supreme Court in Commissioner of Central Excise, Kerala Vs. Larsen & Toubro Ltd [2015 (39) S.T.R. 913 (S.C.)]; (ii) A finding has also been recorded by the Commissioner in the impugned order that the aforesaid contracts were composite contracts involving supply of goods/ material for execution of civil construction and it is for this reason that the impugned order classifies the contracts under Works contract post 1 June, 2007. The impugned order has, therefore, wrongly sustained the demand for the period prior to 1 June, 2007 under Commercial or Industrial Construction and/ or Construction ....
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....ice provider for rendering the services. The value of free of cost material is neither an amount 'charged' by the service provider, nor a 'consideration' paid by the service recipient. The impugned order has, therefore, wrongly rejected the applicability of the Composition Scheme for want of inclusion of the value of free of cost material in the total assessable value; (vii) With respect to the contract with M/s. Indure Private Limited, all the services related to construction and operation of the Suratgarh Super Thermal Power Station. Services rendered in relation to distribution of electricity are exempt from payment of service tax; (viii) Service Tax cannot be levied for construction of residential quarters for personal use; (ix) The value of material/ goods sold have to be reduced from the taxable value; (x) The impugned order confirms demands under categories not proposed in the show cause notice, which is not permissible in law; and (xi) The extended period of limitation could not have been invoked as disputes pertaining to tax liability under a Works Contract and issue regarding payment of service tax by a sub-contractor were subjected to a major litigation. 7. Sh....
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....ced to cover composite works contract and so service rendered in a works contract cannot be covered under any other category of service prior to 01 June, 2007. The relevant portion of the judgment is reproduced below : "15. A reading of this judgment, on which counsel for the assessees heavily relied, would go to show that the separation of the value of goods contained in the execution of a works contract will have to be determined by working from the value of the entire works contract and deducting therefrom charges towards labour and services. Such deductions are stated by the Constitution Bench to be eight in number. What is important in particular is the deductions which are to be made under sub-paras (f), (g) and (h). Under each of these paras, a bifurcation has to be made by the charging Section itself so that the cost of establishment of the contractor is bifurcated into what is relatable to supply of labour and services. Similarly, all other expenses have also to be bifurcated insofar as they are relatable to supply of labour and services, and the same goes for the profit that is earned by the contractor. These deductions are ordinarily to be made from the contractor's ac....
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....der for such service rendered by him. This would unmistakably show that what is referred to in the charging provision is the taxation of service contracts simpliciter and not composite works contracts, such as are contained on the facts of the present cases. It will also be noticed that no attempt to remove the non-service elements from the composite works contracts has been made by any of the aforesaid Sections by deducting from the gross value of the works contract the value of property in goods transferred in the execution of a works contract. [emphasis supplied] 11. The Commissioner did notice that the contracts were composite contracts with material and there was transfer of property in goods in the execution of the civil construction and, therefore, classified them as "Works Contract" for the period from 01 June 2007. Even, after having so noticed, the Commissioner observed that this would not necessarily mean that the service provided by the Appellant prior to 1 June 2007 cannot be classified under any other pre-existing taxable category. The observations of the Commissioner are as follows: (1) From the above discussion it is evident that impugned services were classifia....
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....s contract can be subjected to levy of Service Tax either under "Commercial or Industrial Service" or under "Construction of Complex Service". Following the said decision of the Supreme Court in Larsen & Toubro, a Division Bench of the Tribunal in Emaar MGF Construction also observed: "23. It is, therefore, clear from the aforesaid judgment of the Supreme Court in Larsen & Toubro that a Composite Works Contract cannot be taxed under CCS under Section 65(105) (zzzh) as the scope is limited to cover contract of service simplicitor only. 24. What is also important to note is that the definition of CCS in Section 65(105)(zzzh) remained the same even after 01 June, 2007 when Works Contract Service was introduced. In the absence of any change in the definition of CCS, the judgment of the Supreme Court in Larsen & Toubro will apply to a period after 01 June, 2007 also." 13. The position, therefore, that emerges is that prior to 1 June 2007, Service Tax could not be levied on a composite works contract involving supply of goods/ materials for execution of Civil Construction. Thus, levy of Service Tax for a service provided prior to 1 June 2007 under "Commercial and Industrial Service"....
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....ent proceeding, cannot be sustained. This is what was observed by the Supreme Court in Hindustan Polymers Company and the relevant portion is reproduced below: 6. While we appreciate the Tribunal's desire to do complete justice and mould the relief in that direction, we think that, in the circumstances, the Tribunal should not, in the case, have passed an order which proceeded upon a basis that is altogether different from that of the demand made upon the Appellants. That is not "moulding" relief. The demand that was made upon the Appellants was under Tariff item 68 and it proceeded upon the basis that there was a process of manufacture of coloured polystyrene from uncoloured polystyrene. Having come to a conclusion against the Revenue on these counts, the appropriate order for the Tribunal to have passed was to have set aside the demand and left it open to the Revenue to proceed against the appellants, as permissible under the law. The Appellants would then have had the opportunity of meeting the precise case made out by the Revenue. 15. This is what was also observed by the Supreme Court in Reckitt Colman of India in paragraph 3 of the judgment which is reproduced below: 3.....
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..... Explanation - For the purposes of this rule, gross amount charged for the works contract shall not include Value Added Tax (VAT) or sales tax, as the case may be, paid on transfer of property in goods involved in the execution of the said works contract. (2) The provider of taxable service shall not take CENVAT credit of duties or cess paid on any inputs, used in or in relation to the said works contract, under the provisions of CENVAT Credit Rules, 2004. (3) The provider of taxable service who opts to pay service tax under these rules shall exercise such option in respect of a works contract prior to payment of service tax in respect of the said works contact 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." 19. It needs to be noted that 'two' percent of the gross amount mentioned in rule 3(1) was enhanced to 'four' percent by an amendment made in the rule w.e.f. 1 March 2008. 20. The said Composition Scheme was framed by the Central Government exercising powers conferred by sections 93 and 94 of the Act. Rule 3 (1) provides that, notwithstanding, anything contained i....
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....that the option is exercised under the Composition Scheme if the ST-3 returns reflect the rate of tax specified in the Composition Scheme and the observations are as follows: "The above Rule requires that the provider who opts to pay tax under the Rule shall exercise such option prior to payment of Service Tax. We find force in the Appellant's contention that the fact that they had started paying tax under the Works Contract Composition Scheme is quite evident from the rate of tax reflected in the ST-3 returns. In any case, they had exercised option on 26-9-2007, the substantial benefit cannot be denied for procedural deficiency of delay in opting for Works Contract Service by a specific declaration under Rule 3. More so, when no format has been prescribed for making/exercising an option nor has it been specified as to whom the option must be addressed. We agree that the fact of paying Service Tax at the composition rate in the returns filed by them, is enough indication to show that they have opted for payment under the Works Contract Composition Scheme." [emphasis supplied] 22. Shri Vivek Pandey learned Authorised Representative of the Department, however, submitted that it w....
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.... Department are that the Appellant did not submit the option in writing to the Department before payment of Service Tax and the tax paid did not include the cost of the material supplied free of cost to the Appellant. 24. Reliance has wrongly been placed by the learned Authorised Representative of the Department on the decision of the Supreme Court in Dilip Kumar and Company. In the first instance, as noted above, the learned Authorised Representative is not correct in his submission that the Composition Scheme is by way of an exemption Notification. In any case, as there is no ambiguity in Rule 3, the decision of the Supreme Court in Dilip Kumar and Company will not come to the aid of the Department. 25. The Constitution Bench of the Supreme Court in Dilip Kumar and Company was constituted to examine what would be the interpretative rule to be applied while interpreting a tax exemption provision/ notification when there is an ambiguity as to its applicability with reference to the entitlement of the assessee or the rate of tax to be applied. The Supreme Court observed that the core issue to be examined in the event of any ambiguity in an exemption notification is whether the ben....
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....at gross amount charges and is leviable to pay service tax. On that basis, it was sought to argue that the value of goods/materials supplied free is a form of payment and, therefore, should be added. We fail to understand the logic behind the aforesaid argument. A plain reading of Explanation (c) which makes the 'gross amount charges' inclusive of certain other payments would make it clear that the purpose is to include other modes of payments, in whatever form received; be it through cheque, credit card, deduction from account etc. It is in that hue, the provisions mentions that any form of payment by issue of credit notes or debit notes and book adjustment is also to be included. Therefore, the words 'in any form of payment' are by means of issue of credit notes or debit notes and book adjustment. With the supply of free goods/materials by the service recipient, no case is made out that any credit notes or debit notes were issued or any book adjustments were made. Likewise, the words, 'any amount credited or debited, as the case may be', to any account whether called 'suspense account or by any other name, in the books of accounts of a person liable to pay service tax' would not ....