TaxTMI 
TaxTMI 
2024 (6) TMI 303
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....fied under WCS in terms of Section 65 (105) (zzzza) of the Finance Act, 1994. Show cause notice was issued to the appellant proposing to demand differential service tax for the disputed period along with interest and for imposing penalties. After due process of law, the original authority confirmed the demand, interest and imposed penalties. Aggrieved by such order, the appellant is now before the Tribunal. 2. The Ld. Counsel Shri G. Natarajan appeared and argued for the appellant. Ld. Counsel made the following submissions : 2.1 It is submitted that the appellant had discharged service tax entirely during the disputed period. In respect of three residential projects, undertaken during this period, the appellant had paid Service Tax under "construction of complex service - CCS", after availing 67 % abatement from value, as per Notification 1/2006 ST Dt. 01.03.2006. It is the allegation of the department that the activities undertaken by the appellant involves transfer of property in goods and hence merits classification under Works Contract Service, as defined under Section 65 (105) (zzzza) of the Finance Act, 1994. Under Works Contract service, in order to levy Service Tax only ....
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....of extended period of demand are completely absent in this case. Till the issue was settled by the Hon'ble Supreme Court in L & T case supra, the issue of classification of construction service was under huge confusion. In fact, several show cause notices have been issued by the department, demanding Service tax on construction activities under CCS / CICS for the period post 01.06.2007 also and after the decision of the Hon'ble Supreme Court, so many such decisions have been set aside by the Tribunal and various Courts. So the payment of Service Tax by the appellant under CCS is only due to the bonafide belief and in accordance with contemporaneous view entertained by the department in many cases. Further, this is not a case of non-payment of Service Tax. The appellant had paid Service tax and also filed their ST-3 returns, by indicating the category of service and the benefit of abatement claimed. Thus, the appellant had not suppressed any facts from the knowledge of the department. The issue is purely one of interpretation of classification of service. 2.3.2 The CBIC itself has issued a circular bearing No. 98/1/2008 ST Dt. 04.01.2008, wherein it has been clarified that ongoing ....
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....titutional scheme of separation of taxing powers, the Union Government cannot levy Service Tax on the activity of transfer of property in goods. The benefit of composition scheme has been denied to the appellant on the only ground that the appellant had not opted for the same. 2.4.1 The appellant wishes to submit that since they have been paying Service Tax under CCS, there is no occasion for them to opt for the composition scheme. Once the demand of Service tax is made under WCS, the benefit of either Rule 2A of the Service Tax (Determination of Value) Rules, 2006 or the benefit of composition scheme must be extended to the appellant as otherwise, it will lead to levy of Service Tax on the value of transfer of property in goods and hence the entire demand of Service tax confirmed on the appellant would be without the authority of law, as the Union Government cannot levy Service Tax on the value of transfer of property in goods, which falls within the exclusive domain of the State Governments as per S.no. 54 of List II of seventh schedule to the Constitution. In other words, the failure of the appellant to opt for the compositions scheme cannot enable the Union Government to levy ....
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....classification of service under WCS for the disputed period is legal and proper (ii) whether the quantification of service tax demand is sustainable or not. (iii) whether the invocation of extended period is sustainable or not. 6. The Ld. Counsel has argued that during the disputed period the appellant has classified the services rendered by them under Construction of Complex Service (CCS) and discharged the service tax correctly. The Ld. Counsel does not dispute that the works executed were composite in nature involving both use of materials and rendition of service. The services are therefore correctly classifiable under Works Contract Service. The issue of classification is not disputed by the appellant. 7. The Ld. Counsel has put forward arguments on limitation. It is submitted that during the relevant period there was much confusion as to the classification of construction services and only by the decision of the Hon'ble Apex Court in the case of Commissioner of C.Ex & Cus., Kerala Vs Larsen & Toubro Ltd. - 2015 (39) S.T.R 913 (SC), it was settled that composite contracts can be classified only under WCS. The appellant had classified the services under CCS on bonafide belief....
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.... to payment of service tax in respect of the said works contract and the option so exercised shall be applicable for the entire works contract and shall not be withdrawn until the completion of the said works contract." 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 in opting for Works Contract Service by a specific declaration under Rule 3. More so, when no format has been prescribed for making/exercising an option nor has it been specified as to whom the option must be addressed. We agree that the fact of paying Service Tax at the composition rate in the returns filed by them, is enough indication to show that they have opted for payment under the Works Contract Composition Scheme. Reliance is placed on the case of Bridge and Roof Company (supra), wherein it was ....