TaxTMI 
TaxTMI 
2021 (11) TMI 695
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....amount for the entire contract without invoicing separately for the goods and the services. It is undisputed that the appellant is liable to pay service tax on these services under the head of works contract service and the appellant is also liable to pay VAT on the goods component of these contracts. The appellant paid VAT on the goods component reckoning 70% of the total contract of the value of the goods as per the provisions of Tamil Nadu Value Added Tax Act and Rules and paid service tax on 30% of the total contract value. The case of the Revenue is that since the appellant could not ascertain the actual value of goods transferred, it should have paid service tax under composition scheme. After calling for information from the appellant and examining the records, a show cause notice dated 21.12.2016 was issued to the appellant demanding differential service tax of Rs. 1,51,82,658/- as follows :- Period No. of Invoices Gross Value (Rs.) Taxable value after abatement Rate of (%) Service Tax Payable Service Tax paid Differential Tax to be paid 1.04.2011 to 30.6.2012 51 29228340 29223840 4/4.8 1222294 932989 289305....
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....7 [Composition Scheme ]" upto 30.06.2012. For the period after 01.07.2012, the value of service portion of works contract of composite nature has to be arrived at as specified in Rule 2A (ii) of Service Tax (Determination of Value) Rules, 2006, as amended. Thus, there are two periods in question upto 30.06.2012 and thereafter. Period Upto 30.06.2012 5. For the period upto 30.06.2012, the case of Revenue is that since the appellant did not separately invoice for the service and goods components of the works contract, it was bound to follow the composition scheme and pay service tax accordingly. Paragraph 6.8 of the impugned order reads as follows: "6.8 It is to be further noted that the provisions of Composite Scheme reads as "Notwithstanding anything contained in Section 67 of the Act and Rule 2A of the Service (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 (4% v....
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....elangana that where options are given to the assessee it is not open for the Department to choose an option for it. We, therefore, find that for the period prior to 01.07.2012, the demand in the show cause notice based on enforcing the composition scheme upon the appellant, which is only an option available to the appellant, cannot be sustained and needs to be set aside. Period from 01.07.2012 9. From 01.07.2012, service tax became payable on all services except those which are in the negative list. Section 66E was introduced in the Finance Act, 1994 whereby certain services have been declared as "declared services" and service tax is payable on such services. Clause (h) of this list includes "service portion in the execution of works contract". The composition scheme has been abolished and valuation has to be done as per new Rule 2A of the Service Tax (Determination of Value) Rules, 2006 which reads as follows:- "RULE 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....
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....value of goods as well as land or undivided share of land, the service tax shall be payable on thirty per cent. of the total amount charged for the works contract. [(B) in case of works contract, not covered under sub-clause (A), including works contract entered into for, - (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 tiling or installation of electrical fittings of immovable property, service tax shall be payable on seventy per cent. of the total amount charged for the works contract. Explanation 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; (b) "total amount" means the sum total of the gross amount charged for the works contract and the fa....
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.... Tamil Nadu VAT Act, no service tax can also be charged on the value of the goods. The case of the Revenue is that as per Explanation (c) of this clause "where value added tax or sales tax has been paid or payable on the actual value of property in goods transferred in the execution of works contract, then, such value adopted for purposes of payment of value added tax or sales tax, shall be taken as the value of property in goods transferred in the execution of the said works contract, for determination of the value of service portion in the execution of works contract under this clause". Since in this case, the appellant has not paid VAT on the basis of the actual value of the goods transferred but on presumption as per the Tamil Nadu VAT Act such value cannot be adopted for the purpose of calculating the value of service. It is undisputed that the actual value of the property transferred is not available since it was a composite contract. Therefore, Revenue's case is that the appellant is not covered by Rule 2A (i) at all and the value of service has to be determined as per Rule 2 A (ii). This clause deals with three categories of works, of which 'B' applies to the present case: ....
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....xplanation (c) of Clause (i) where value added tax has been paid or is payable on the actual value of property in goods transferred in the execution of works contract the same shall be taken into account for determining the value of the works contract on which service tax has to be paid and the actual value is not available from the records. According to the Revenue, the value should be determined as per the clause (ii), which also, like the Tamil Nadu VAT Act and Rules, lays down a proportion of the consideration for the indivisible works contracts on which service tax should be paid. Since the works in this case were not original works, it falls under category B of clause (ii) of this Rule and service tax should be paid on 70% of the value of the works contract. In other words, if the Revenue's argument is accepted, the appellant will have to pay service tax on 70% of the gross amount charged for the works contract and the appellant has already paid VAT on 70% of the gross amount charged as per the Tamil Nadu VAT Act. This will lead to an anomalous situation where the appellant has to pay VAT as well as service tax on 40% of the total value of the works contract. On identical sit....
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....der the local/State Act, insofar as payment of Value Added Tax on that component (70%) is concerned. A reading of the show cause notice dated 24th January, 2008 would go to show that the entire thrust of the Department's case is the alleged liability of the appellant-assessee to pay service tax on the gross value. In the aforesaid show cause notice, the details of the value of the goods, raw materials, parts, etc. and the value of the services rendered have been mentioned and service tax has been sought to be levied at the prescribed rate of ten per cent (10%) on the differential amount. It is now stated before us that the aforesaid figures have been furnished by the assessee himself and, therefore, must be understood not to be authentic. This, indeed, is strange. No dispute has been raised with regard to the correctness of the said figures furnished by the assessee in the show cause notice issued to justify the stand now taken before this Court; at no point of time such a plea had been advanced. 13. Besides the above, the affidavit of the learned Commissioner, referred to above, proceeds on the basis that the appellant assessee is also liable to pay service tax on the rem....