TaxTMI 
TaxTMI 
2019 (7) TMI 1793
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....ling benefit under the Works Contract (Composition 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 ....
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..... Shri Narasimhan, learned Counsel appearing for the Appellant, made the following submissions; (i) No service tax is leviable before 01 June 2007 on any contract involving transfer of property in goods. In this connection, 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....
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.... (2) TMI 1325- Supreme Court], the value of free of cost material supplied by a service recipient to a service provider is not to be included in the assessable value for determination of service tax liability as it does not form part of the value charged by the service 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 s....
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.... 10. The first issue that arises for consideration is whether Service Tax could levied before 01 June 2007 on composite contracts involving supply of goods/ materials during execution of civil constructions. The Supreme Court in Larsen & Toubro noticed that it is only w.e.f 01 June, 2007 that Section 65(105)(zzzza) of the Act was introduced 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 establishmen....
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....said sub-clauses are service contracts simpliciter without any other element in them, such as for example, a service contract which is a commissioning and installation, or erection, commissioning and installation contract. Further, under Section 67, as has been pointed out above, the value of a taxable service is the gross amount charged by the service provider 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....
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....fied. [emphasis supplied] 12. The Commissioner was justified in observing that w.e.f. 1 June 2007, a composite works contract involving supply of goods/ materials is subjected to levy of Service Tax under "Works Contract", but in view of the law laid down by the Supreme Court in Larsen & Toubro, the Commissioner fell in error in observing that prior to 1 June 2007 a composite works 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 ....
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....une, 2007 and post 01 June 2007, the nature of service rendered by the Appellant was WCS and not CCS. The show cause notice alleged that the Appellant was providing CCS service and the demand has also been confirmed under this category by the adjudicating authority. The impugned order, therefore, deserves to be set aside for this reason alone since the demand made under a particular category of service found to be incorrect in a subsequent 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 th....
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....--- 3. (1) Notwithstanding anything contained in section 67 of the Act and rule 2A of the Service Tax (Determination of Value) Rules, 2006, the person liable to pay service tax in relation to works contract service shall have the option to discharge his service tax liability on the works contract service provided or to be provided, instead of paying service tax at the rate specified in section 66 of the Act, by paying an amount equivalent to two per cent of the gross amount charged for the works contract. 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 sai....
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....ion Scheme to the Appellant is that the Appellant had not submitted any information in writing to the Department regarding the discharge of his Service Tax liability under the Composition Scheme. As noticed above, there is no requirement of giving any intimation in writing to the Department under Rule 3 of the Composition Scheme and it is enough if the option is exercised in the ST-3 return by making payment at the rate of tax contained in the Composition Scheme. A Division Bench of the Tribunal in ABL Infrastructure Pvt Ltd also observed 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 ....
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....e Service Tax in the manner provided in the 2006 Rules or by payment of an amount equivalent to a certain percentage of the gross amount charged for the works contract. The Composition Scheme cannot, therefore, be treated as an exemption Notification under any circumstance. The Department does not dispute that the Appellant discharged the Service Tax liability by payment of an amount equivalent to a certain percentage of the gross amount charged for the works contract as stipulated in Rule 3 of the Composition Scheme since the only reasons given by the 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....
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....ng of the Commissioner runs contrary to the decision of the Supreme Court in the case of Bhayana Builders (P) Limited. The Supreme Court observed that the value of taxable services cannot be dependent on the value of goods supplied free of cost by the service recipient and such a value has no bearing on the value of services provided by the service recipient. The relevant paragraphs 15 and 16 which deals the issue are as under: "15. It was argued that payment received in 'any form' and 'any amount credited or debited, as the case may be...' is to be included for the purposes of arriving 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 o....