TaxTMI 
TaxTMI 
2022 (6) TMI 303
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....011 01.06.2007 to 31.07.2008 01.08.2008 to 31.07.2009 01.07.2010 to 30.06.2011 7,24,13,848/- 4,22,05285/- 8,24,872/- 2. Appeal No. ST/552/2011 STC /30/COMMR/AHD/2011 dated 14.06.2011 SCN dated 05.10.2010 01.08.2009 to 30.06.2009 93,88,280/- 1.1 Brief facts of the case involved in above appeals are that searches were carried out by DGCEI officers at the registered office of the appellant on the basis of an information that appellant was paying Service Tax under the Works Contact (Composition Scheme of Payment of Service Tax) Rules, 2007 on those contracts which were executed on or before 1-6-2007. Investigations undertaken by DGCEI revealed that appellant was classifying the services rendered for 34 ongoing contracts under 'Commercial or Industrial Construction Services' and 'Construction of Complex Services' and was also paying Service Tax before 1-6-2007. Appellant reclassified the services of ongoing contracts under 'Work Contract Services' with effect from 1-6-2007 under composition scheme by paying Service Tax at concessional rate of 2% on introduction of Works Contract Services, which was increased to 4% with effect from 01.03.2008. A show cause noti....
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....6.2007, the Appellant were discharging the service tax under the category of 'Commercial or Industrial Construction Service' by availing the abetment under relevant notification. Prior to June 2007 the category 'Work Contract' was not present in the Finance Act, 1994 and therefore, could not be made taxable. Thus, any payment made by the Appellant prior to June 2017 cannot be said to be made towards service tax for the said works contract. The service tax paid was under the category of 'Commercial or Industrial Construction Service'. Thus, they are eligible for Composition Scheme. He produced the Relevant portion of Rule 3(3) of the Composition Scheme "(3) The Provider of taxable service who opts to pay service tax under these rules shall exercise such option in respect of a work contract prior to payment of service tax in respect of the said work contract and the option so exercised shall be applicable for the entire work contract and shall be withdrawn until the completion of the said work contract." 2.2 Appellant opted for payment under the Composition Scheme right from 01.06.2007 prior to payment of service tax in respect of the said works contract. With effect from....
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.... Scheme to the Appellant is misplaced and thus, the impugned order deserves to be quashed and set aside. 2.5 As regard the imposition of penalty in respect of show cause notice dated 22.10.2008 he argued that penalty under Sections 76 and 78 of the finance Act, 1944 cannot be simultaneously imposed. There is no question of charging interest and imposing penalty as the demand of service tax itself not sustainable. 03. Shri Ghanshyam Soni, Joint Commissioner (AR) appearing for the revenue has submitted the written submission and countered the appellants' arguments. He supported the findings in the impugned order and submits that on the issue of classification of the services provided by the Appellant from Commercial or Industrial Construction Services & Construction of Complex Service into Work Contract Service w.e.f. 01.06.2007, the CBEC vide Circular No. 128/10/2010-S.T. dated 24.08.2010 acknowledged the prevalence of confusions / disputes with respect to long term work contracts which were entered into prior to 01.06.2007. It was clarified that the said services like Construction, Erection, Commissioning or installation, repair services were classifiable under respective tax....
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....07, the activity in the nature of work contract were not taxable at all. Case of Larsen & Toubro Ltd. is on different footing. In the said Judgment Supreme court neither made any reference to the Judgment of Nagarjun Construction supra nor overruled it in the Judgment. Therefore the order of Nagarjun Construction Ltd. is squarely applicable to the present appeals. 04. We have considered the submissions made by both the sides and perused the records. We find that the case of the department is that Appellant was paying service tax under Commercial or Industrial Construction Service / Construction of Complex Service for the period prior to 01.06.2007. However, after introduction of work contract service w.e.f. 01.06.2007 Appellant switched over to payment of Service tax from Commercial or Industrial Construction Service/ Construction of Complex Service to Works Contract Service Composition Scheme w.e.f. 01.06.2007 for ongoing projects. As per the Provision of Works Contract (Composition Scheme for Payment of Service tax) Rules, 2007, Appellant was not eligible for the benefit of composite scheme for ongoing projects for which service tax paid before 01.06.2017 under Commercial or I....
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....ation for exercising an option to choose the scheme prior to payment of service tax in respect of a particular works contract. Once such an option is made, it is applicable for the entire contract and cannot be altered. Therefore, in case a contract where the provision of service commenced prior to 1-6-2007 and any payment of service tax was made under the respective taxable service before 1-6-2007, the said condition under rule 3(3) was not satisfied and thus no portion of that contract would be eligible for composition scheme. On the other hand, even if the provision of service commenced before 1-6-2007 but no payment of service tax was made till the taxpayer opted for the composition scheme after its coming into effect from 1-6-2007, such contracts would be eligible for opting of the composition scheme. 4. The Board's previous Circular No. 98/1/2008-S.T., dated 4-1-2008 and the ratio of judgment of the High Court of Andhra Pradesh in the matter of M/s. Nagarjuna Construction Company Limited v. Government of India [2010 (19) S.T.R. 321 (A.P.) = 2010 TIOL 403 HC AP ST] are in line with the above interpretation. 5. Trade Notice/Public Notice may be issued accordingly. ....
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....ommission or installing services, commercial or industrial construction services or construction of complex services, as the case may be, is not entitled to avail the composition scheme under the 2007 Rules. The above judgment passed by the Hon'ble High Court of Andhra Pradesh was upheld by the Hon'ble Supreme Court reported as 2012 (28) S.T.R. 561 (S.C.). The Hon'ble Supreme court held as under: 25. In our opinion the High Court did not commit any mistake while upholding validity of the Impugned Circular. 26. In our opinion the Impugned Circular has only explained the contents of Rule 3(3) of the 2007 Rules so as to provide guidelines to the Revenue Officers. 27. On perusal of Rule 3(3) of the 2007 Rules it is very clear that the assessee who wants to avail of the benefit under Rule 3 of the 2007 Rules must opt to pay service tax in respect of a works contract before payment of service tax in respect of the works contract and the option so exercised is to be applied to the entire works contract and the assessee is not permitted to change the option till the said works contract is completed. 28. In the instant case it is an admitted fact that ....