TaxTMI 
TaxTMI 
2026 (3) TMI 983
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.... 'Works Contract Service' claiming the benefit under under Notification No. 24/2012 dated 06.06.2012. During Departmental audit of the accounts and ST-3 returns for August 2011 to March 2014, it was found that the appellant valued the service portion under Rule 2A(i) of the Service Tax (Determination of Value) Rules, 2006 (Valuation Rules 2006), by considering only labour charges and excluding material cost. The Department held that Rule 2A(i) was inapplicable since the value of property in goods transferred was not determinable and the appellant had admitted that labour charges were not ascertainable for VAT purposes. Accordingly, valuation under Rule 2A(ii)(B), requiring adoption of 70% of the total contract value, was considered applicable. Hence Show cause Notice (SCN) for a differential service tax demand of Rs.1,07,24,022/- for the period July 2012 to September 2014, was issued by the department. The Commissioner passed the impugned Order-in-Original (OIO) and confirmed the demand while imposing penalties under Sections 78 and 77(2) of the Finance Act, 1994, leading to the present appeal. 3. The learned Advocates Shri Raghav Rajeev and Ms. Nimrah Ali appeared for the appel....
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....Udyam v. CCE (2009 (16) STR 172) and in the Appellant's own case, Super Transport Pvt. Ltd. v. CCE (2017 (51) STR 46). F. Without prejudice, even assuming the Department's stand that VAT was paid on 70% of the contract value, service tax can be levied only on the remaining 30%. On this basis, the maximum service tax liability works out to Rs.80,54,155/-, whereas the Appellant has already discharged Rs.80,60,007/-. G. The Ld. Counsel relied upon the following judgments in support of his submissions: a. Wipro GE Medical Systems Pvt. Ltd. vs. Commissioner of Service Tax, Bangalore, 2009 (14) STR 43 (Tri-Bang), upheld by the Hon'ble Supreme Court in Commissioner vs. Wipro GE Medical Systems Pvt. Ltd., 2012 (28) S.T.R. 144 (S.C.). b. Safety Retreading Company (P) Ltd. and others vs. Commissioner of Central Excise, Salem and other, 2017 (48) S.T.R. 97 (SC). c. M/s. Johnson Lifts Pvt. Ltd. vs. Commissioner of G.S.T and Central Excise, 2023 (9) TMI 79-CESTAT Chennai. d. M/s. Touchstone Infrastructure and Solutions Pvt. Ltd. vs. The Commissioner of Central Taxes and Central Excise, Chennai North Commissionerate, 2021 (11) TMI 695-CESTAT ....
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....n dispute. The controversy in the present appeal is confined solely to the valuation adopted for the purpose of payment of service tax. 5. The Appellant after classifying the activity as "Works Contract Service" was availing the benefit of Notification No. 24/2012 dated 06.06.2012, whereby they were liable to pay service tax on the service charge excluding the material cost, in terms of Valuation Rules 2006, as amended by notification No 24/2012, dated: 06.06.2012. The Appellant is being clever when he states that the invoices separately disclose material cost and labour charges. While such a split is made in the invoice it is not based on actuals. The dispute is whether the goods are to be valued as per Rule 2A(i) [Appellant] or Rule 2A(ii) [Revenue]. 6. Rule 2A of the Service Tax (Determination of Value) Rules 2006 is reproduced below for ease of reference: 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 be determined in the following manner, namely:- ....
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....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 subclause (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. (emphasis added) 7. It is revenue's contention that as per the invoices raised there is no transfer of property in goods involved in the execution of the said works contract. As stated in the SCN the Appellant have been discharging VAT under the provisions of TNVAT, 2006. Rule 8(5) of the TNVAT Rules, 2007 prescribes two methods under which VAT is required to be discharged. (i) Clause (d) of the said Rule 8(5) states that, all amount towards labour charges and other charges not involving any transfer of property in goods, actually incurred in connection with the ....
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....d be interpreted. It held: "As to how statutory fictions are to be interpreted is by now well-settled. The approach formulated by Lord Asquith in East End Dwelling Co. Ltd. Vs Finsbary Borough Council, [1952] AC 109 has been approved by this Court in a number of cases. The line of approach set out by Lord Asquith is as under: "If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanies it. The statute says that you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs. " This line of approach has been adopted by this Court in a number of cases and we may refer only to some of them. See M.K. Venkatachalam Vs Bombay Dyeing and manufacturing Co. Ltd., [1959] SCR 703: AIR 1958 SC 875; Commissioner of Income Tax, Delhi Vs Teja Singh, AIR 1959 SC 355 In Commissioner of Income Tax Delhi Vs Teja Singh (....
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....r consideration before the Hon'ble Supreme Court was as to whether an assessee who is liable to pay service tax under works contract service has the legal right not to follow Rule 2A of the Service Tax (Determination of Value) Rules, 2006 nor the Composition Scheme on the ground that in terms of Section 67 of the Finance Act, 1994 an 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 service and in the process also entitled to avail the CENVAT Credit? The Hon'ble Court held: "59. With respect to the 'works contract service' and/or the Composition Works Contract the valuation has to be made as per Rule 2A of the Valuation Rules, 2006. Even as per the Composition Scheme vide Notification 32/2007 dated 22.04.2007 an assessee has an option to discharge the 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 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....
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....t similar to the impugned appeal. The facts in Wipro GE are that the appellants claimed 70% deduction in respect of spares and parts in terms of Annual Maintenance Contracts (AMC). The Tribunal remanded the matter to examine the invoices produced by the appellants with regard to the cost of spares and parts. The Tribunal held: "8. On a very careful consideration of the fact, we find that there is no dispute with regard to the leviability of service tax on the maintenance and repair services. The main point of dispute is with regard to the valuation. However, Section 67 of the Finance Act clearly provides for the abatement of the value of the goods sold in the course of the carrying out of the service. The point is whether the goods are actually sold. According to the department, the contract is only for the maintenance and repair. Therefore, it cannot be said that the spare parts were sold. This view is not correct. The chartered accountant has actually given a certificate with regard to the consumption of materials. It is also not denied that in the course of the maintenance no material was used. In several decisions it has been held that service tax cannot be levied on t....