TaxTMI 
TaxTMI 
2024 (2) TMI 1254
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.... both supply of goods as well as provisions of services therefore the appellant reclassified their activity from construction services to works contract service for ongoing projects and paid the service tax at the prescribed rate of 2% on the total value of the works contract. The Appellant was issued show a cause notice demanding differential service tax on the ground that in terms of Rule 3 (3) of the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007, the provider of taxable service who opts to pay the service tax in relation to "Works Contract Service" shall exercise the option for payment of service tax under works contract service before exercising such option. Further that as per CBEC Circular No. 98/01/2008 - ST dated 04.01.2008 benefit of Composition Scheme under "Works Contract Service" are not admissible for on-going projects. It was claimed by the department that the appellant was wrongly availing the benefit of the composition scheme by changing the classification of their service from Construction & Industrial Construction services to the Works Contract Service for the said purpose. Both the lower authorities have confirmed the demand along ....
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....is composite in nature as the Appellant is engaged in both supply of goods as well as service and have been rightly classified under the tax entry works contract service. It can be understood from the interpretation by the Hon'ble Supreme Court in the case of Larsen & Toubro Ltd (supra) that there is no liability to service tax in respect of indivisible composite works contract prior to 01.06.2007. In the present case the Appellant is not contesting their service tax liability under works contract service after 01.06.2007 but their entitlement to pay the said tax in terms of composition scheme of 2007. The original authority held that the appellants switched over from construction service to works contract service only to avail the benefit of the scheme and thus are in contravention of the provisions of the said scheme. It has been observed that the denial of the composition scheme by the Adjudicating Authority is only based on the change of head from Commercial or Industrial construction service to works contract service that because of which the Appellant cannot opt for payment of service tax under works contract service under the composition scheme. The legal position with regar....
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....ed of." 4.2 The absolute identical issue that whether in case of ongoing project running from the period prior to 01.06.2007 and after 01.06.2007 whether the assessee is eligible to avail the composition scheme under 'works contract service' form 01.06.2007 has been elaborately considered by relying upon Hon'ble Gujarat High Court, in the case of JMC Project India Ltd by this Tribunal order No. A/10510-10511/2022 the relevant order is reproduced below:- "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.1. 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 com....
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....ks Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. This provision casts an obligation 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 allered. 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 it the taxpayer opted for the composition scheme after its coming into effect from 1-6-2007, such contracts would be eligibile 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) ar....
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....ssion or installing services, commercial industrial construction services or construction of complex services, as the case may be, is not entitied 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 Horrible Supreme Court reported as 2012 (28) S.T.R. 561 (S.C.). The Han'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 fac....