TaxTMI 
TaxTMI 
2023 (10) TMI 62
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 2006 Rules] as the appellant had not opted for the composition scheme under the Works Contract (Composition Scheme for Payment of Service Tax) Rules 2007[the Composition Scheme] . The Supreme Court also directed the Tribunal to decide whether the extended period of limitation could have been invoked by the department. 3. The appellant had a centralized registration under the Finance Act under 'commercial or industrial constructions' services and 'construction services'. It entered into contracts with consumers for execution of contracts in respect of pre-engineered or pre-fabricated buildings/structures and paid service tax on the gross amount of the contract under the category 'commercial or industrial constructions' service made taxable under section 65 (105)(zzq) of the Finance Act 1994 [the Finance Act]. 4. The department was, however, of the view that the services rendered by the appellant would fall under 'works contract', chargeable to service tax under 65(105)(zzzza) of the Finance Act. 5. A show cause notice dated 23.10.2012 was, accordingly, issued to the appellant for the period January 2007 to March 2012 alleging that the appellant had utiliz....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... rate specified in Section 66 of the Act by paying equivalent to 2% of the gross amount charged for the works contract. It is to be noted that Rule 3(1) provides notwithstanding anything contained in Section 67 of the Act and Rule 2A of the Service (Determination of Value) Rules, 2006. Therefore, as per the Scheme of the Act the determination of value of service portion in the execution of the works contract is to be made as per Rule 2A, however with an option to the assessee to avail the benefit of Composition Scheme. Therefore, either the assessee has to go for Composition Scheme or go for Determination of Value as per Rule 2A and the assessee has to pay service tax on the service element and can claim CENVAT Credit on the said amount only. 9. In view of the above the impugned judgment and order passed by the CESTAT taking the contrary view is unsustainable by which it is held that the assessee is entitled to take the total contract value which includes both goods and services and remit service tax on the entire value as 'works contract' and the assessee is also entitled to avail the CENVAT Credit on the same. 9.1 However, at the same time the servic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent that in respect of the 'works contracts', the rule provides for determination of the assessable value i.e. the value of taxable service, by excluding - (i) the value of transfer of property in goods involved in the execution of the said works contract. (ii) Value Added Tax (VAT) or Sales Tax, as the case may be, paid, if any, on transfer of property in goods involved in the execution of the works contract. Clause (ii) of the Explanation to rule 2A (as it stood for the period up to 30.06.2012) further provided that where Value Added Tax or Sales Tax, as the case may be, has been paid on the actual value of transfer of property in goods involved in the execution of the works contract, then such value adopted for the purposes of payment of Value Added Tax or Sales Tax, as the case may be, shall be taken as the value of transfer of property in goods involved in the execution of said works contract for determining the value of works contract service under clause; (ii) The appellant was clearing the pre-fabricated/preengineered steel buildings/structures and the parts thereof from its plants on payment of excise duty as appl....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words "one year", the words "five years" had been substituted." 14. It would be seen from a perusal of sub-section (1) of section 73 of the Finance Act that where any service tax has not been levied or paid, the Central Excise Officer may, within one year from the relevant date, serve a notice on the person chargeable with the service tax which has not been levied or paid, requiring him to show cause why he should not pay amount specified in the notice. 15. The "relevant date' has been defined in section 73 (6) of the Finance Act as follows; "73(6) For the purposes of this section, "relevant date" means,- (i) In the case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short paid- (a) where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed; (b) where no periodical return as aforesaid is filed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t appropriate rate on the said amount of service tax and education cess also appears to be recoverable from M/s IBPPL, under the provisions of section 73-B & 75 of Finance Act, 1994." (emphasis supplied) 19. The appellant filed a reply to the aforesaid show cause notice and in respect of the invocation of the extended period of limitation stated as follows: "5.1. It is submitted that we were registered for Commercial and Industrial construction service and discharging service tax on the full value including material prior to 01.06.2007. We have disclosed this fact to the department. Thus the department was fully aware that we were availing credit on the duty paid on material in providing commercial of industrial construction service. Department was thus having complete knowledge of the facts. Only because from 01.06.2007 works contract service was introduced the department cannot be allowed to raise the issue of suppression of facts with intention to evade payment of tax as late as in October 2012 that is nearly after expiry of 5½ years after the introduction of works contract service. Our service tax records were audited by the Excise Department during ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der the commercial or industrial construction service, the same cannot be questioned by invoking extended period of limitation. The department thus having worked under the assumption that our company was right in law in discharging the service tax liability under commercial and industrial construction service and accepted the tax so paid including the value of the material and after availing the CENVAT Credit of excise duty so paid on the goods used in providing the service. It is not possible for the department to turn around in October 2012 nearly alter 5½ years after the introduction of works contract service and choose to allege suppression of facts with intention to evade payment of tax." (emphasis supplied) 20. The order impugned records the following findings on the extended period of limitation: "(B). I find that the SCN issued on 23.10.2012 covers the period from 01.06.2007 to 31.03.2012. The assessee had wrongly classified their service in the category of Commercial or industrial construction service instead of Works Contract Service despite such lucid and explicit provisions. Even after introduction of the works contract service w.e.f. 01.06.2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he other statutory prescribed records maintained by the appellant. The contention is that the appellant had not resorted to non-declaration of facts or information in the returns, nor there was any failure on the part of the appellant to furnish any information required to be disclosed in the returns. Thus, there was no suppression of facts, much less willful suppression with an intent to wrongly avail CENVAT credit. According to learned senior counsel for the appellant, the levy of service tax on works contract service attained clarity only in the year 2015 when the Supreme Court pronounced the judgment in Commissioner of Central Excise vs. Larsen and Toubro [2015 (39) STR 913 (S.C.)] wherein it was held that indivisible contracts are liable to service tax under 'works contract' which was introduced w.e.f. 01.06.2007. Learned senior counsel also pointed out that the Supreme Court in Total Environment Building Systems Pvt. Ltd. vs. Deputy Commissioner of Commercial Taxes [2022 (63) G.S.T.L. 257 (S.C.)] affirmed the aforesaid judgment of the Supreme Court in Larsen and Toubro and held that this judgment was not required to be referred to a Larger Bench of the Supreme Court. Accordin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed senior counsel for the appellant and the learned authorized representative appearing for the department on the issue of limitation have been considered. 24. In the present case the appellant had been regularly filing ST-3 returns and as noted above, audits of the records of the appellant were regularly undertaken. The details of the audit are as follows: S. No. Date of Audit Period Audit Report Ref. 1. March, 2008 April, 2007 to March, 2008 2. March, 2010 to May, 2010 April, 2008 to March, 2010 AR No. 67/2010-11 dated 27.09.2010 3. February, 2012 to April, 2012 April, 2010 to June, 2011 AR No. 9/2012-13 dated 25.05.2012 25. It would be seen that audit reports are dated 27.09.2010 and 25.05.2012. It is, therefore, clear that even after examination of the records of the appellant, the department did not raise any objection regarding the category of the service rendered by the appell....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e appellant's services were chargeable to service tax under WCS. xxxxxxxxxx 17. We are unable to find any proof of intent to evade either from the show cause notice or from the impugned order. Mere omission or merely classifying its services under an incorrect head does not amount to fraud or collusion or wilful misstatement or suppression of facts. The intention has to be proved to invoke extended period of limitation. Supreme Court has delivered the judgment in the case of Larsen & Toubro dated 20 August, 2015, prior to which there was no clear ruling that services which involved supply or deemed supply of goods could only be classified under WCS. The appellant had been classifying its services (which also involved supply/use of goods) under the CICS and Revenue never objected to it and, therefore, the appellant could have reasonably believed it to be the correct head and continued to file returns accordingly and paying duty. Once the returns are filed, if Revenue was of the opinion that the selfassessment of service tax and the classification was not correct, it could have scrutinized the returns and issued notices within time. The show cause notice....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o supports the view of the appellant that it was under a bona fide belief that it was entitled to pay the service tax at the full applicable rate on the gross taxable value in respect of the taxable service provided by it and avail the CENVAT credit on 'input' as well. The Supreme Court, by judgment dated 02.05.2023 has now held that such an option was not available to the appellant. 31. It is, therefore, not possible to sustain the invocation of the extended period of limitation from June 2007 upto September 2010 resorted to in the first show cause notice dated 23.10.2012 issued for the period January 2007 to March 2012. Rule 2A of the 2006 Rules 32. To examine this issue, it would be appropriate to reproduce rule 2A of the 2006 Rules as it stood for the period upto 30.06.2012 and during the period 01.07.2012 to 30.06.2017. It is as follows: Upto 30.06.2006 "2A. Determination of value of services involved in the execution of a works contract: (1) Subject to the provisions of section 67, the value of taxable service in relation to services involved in the execution of a works contract (hereinafter referred to as works contract service), referred ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ds involved in the execution of the said works contract for determining the value of works contract service under this clause. xxxxxxxxxxx Explanation 1. - For the purposes of this rule,- xxxxxxxxxx Explanation 2. - For the removal of doubts, it is clarified that duty of excise paid on any goods, property which is transferred (whether as goods or in some other form) in the execution of works contract, shall not be availed as CENVAT credit.". 33. From a perusal of rule 2A of the 2006 Rules, as was in force prior to 30.06.2012 and after 01.07.2012, it will be evident that in respect of the 'works contracts' it provided for the determination of the assessable value (i.e. the value of taxable service) by excluding- (i) the value of transfer of property in goods involved in the execution of the said works contract. (ii) Value Added Tax (VAT) or sales tax, as the case may be, paid, if any, on transfer of property in goods involved in the execution of the works contract. 34. Clause (ii) of the Explanation to Rule 2A (as it stood for the period up to 30.06.2012) further provided that where Value Added Tax o....