Custom, Excise & Service Tax Tribunal
M/S Pooja Marbles vs Cst, New Delhi on 26 August, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Principal Bench, New Delhi COURT NO. III DATE OF HEARING : 26/08/2016. DATE OF DECISION : 26/08/2016. Service Tax Appeal No. 567 of 2010 [Arising out of the Order-in-Original No. 01/JM/2010 dated 28/01/2010 passed by The Commissioner, Service Tax, New Delhi.] For Approval and signature : Honble Shri S.K. Mohanty, Member (Judicial) Honble Shri V. Padmanabhan, Member (Technical) 1. Whether Press Reporters may be allowed to see :No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it would be released under Rule 27 of : the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair :Seen copy of the order? 4. Whether order is to be circulated to the :Yes Department Authorities? M/s Pooja Marbles Appellant Versus CST, New Delhi Respondent
Appearance Shri Narendra Singhvi, Advocate for the appellant.
Shri Amresh Jain, Authorized Representative (DR) for the Respondent.
CORAM: Honble Shri S.K. Mohanty, Member (Judicial) Honble Shri V. Padmanabhan, Member (Technical) Final Order No. 53552/2016 Dated : 26/08/2016 Per. V. Padmanabhan :-
The appellant is engaged in the activity of construction services. Upto 01/6/07 they were paying service tax after registering themselves under Commercial or Industrial Construction Services (CIC) taxable under Section 65 (105) (zzq) of the Finance Act, 1994 and defined under Section 65 (25) (b) of the Act. After the introduction of the Works Contract Service (WCS) w.e.f. 01/6/07 the appellant opted to reclassify their service under WCS falling under Section 65 (105) (zzzza) and started paying duty under Composition Scheme notified by Notification No. 32/2007-ST dated 22/5/07. The Department took the view that the appellant cannot change the classification of the service rendered by them from commercial or industrial construction to works contract service w.e.f. 01/6/07 for the reason that the service tax payment had already commenced prior to 01/6/07 under CIS and the same works contracts were continued beyond that date. Further, the availment of the composition scheme was also held to be improper in the light of the Rule 3 (3) of the Works Contract (composition scheme for payment of service tax) Rules, 2007 which provides that :-
The provider of taxable service who opts to pay service tax under these rules shall exercise such option in respect of a works contract prior 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.
2. Accordingly show cause notice dated 20/10/2008 was issued which was confirmed vide the impugned order dated 28/1/2010 in which the service tax to the tune of Rs. 1,90,37,638/- was demanded alongwith interest and imposition of penalty. In the impugned order the Commissioner confirmed the demand of service tax for the period June 2007 to March 2008 under the service category of commercial or industrial construction. He also denied the benefit of Notification 12/2003-ST dated 20/6/2003 and benefits of Rule 2A of the Service Tax Determination of Valuation Rules 2006 by which the appellant had sought exclusion of the value of goods supplied under the Works Contract Scheme.
3. The appellant has challenged the impugned order mainly on the following grounds :-
Even though service tax was being paid by them under commercial or industrial construction service prior to 01/6/07, they are entitled to switch over to works contract scheme from the date from which it was introduced i.e. 01/6/07. They have contended that this view has been held by the Honble Supreme Court in the case of CCE & CUS, Kerala vs. Larsen & Toubro Ltd. reported in 2015 (39) S.T.R. 913 (S.C.). The Apex court held that any composite contract which involves both supply of goods as well as rendering of service can only be classified under works contract scheme after its introduction from 01/6/07. The appellant has further submitted that w.e.f. 01/6/07 they will not only be entitled to the change of their classification to WCS, but will also be entitled to the benefit of Rule 2A of the Service Tax Determination of Valuation Rules, 2006. This view finds support in the decision of Tribunal in the case of Ahluwalia Contracts (I) Ltd. vs. CCE, Noida reported in 2015 (38) S.T.R. 33 (Tri. Del.). This decision also stands affirmed by the Honble High Court of Allahabad reported in 2016 (41) S.T.R. J261 (All.). They, however, admitted that they will not be entitled to the benefit of the composition scheme w.e.f. 01/6/07 in view of Rule 3 (3) of the Composition Scheme.
4. We have heard Shri Narendra Singhvi, Advocate, the learned Counsel for the appellant as well as Shri Amresh Jain, learned DR for the Revenue.
5. It is not in dispute that the nature of contracts executed by the appellant are composite which involve supply of goods as well as rendering of service. The appellant was paying service tax prior to the introduction of Works Contract Service [WCS] (w.e.f. 01/6/2007) under Commercial or Industrial Construction Service. After the introduction of the works contract service they have sought re-classification of their service under the newly introduced WCS. Such switch over was denied by the Revenue in the proceedings leading to the impugned order. It has been settled by the Honble Supreme Court in the Larsen & Toubro Limited case that such contracts should be classified only under works contract scheme w.e.f. 01/6/07. Further questions which arise are (i) whether the appellant will be entitled to the benefit of composite scheme and (ii) whether they will be entitled to exclude the value of goods supplied under Rule 2A of the Service Tax Determination of Valuation Rules. We find that both these issues stand decided by the Tribunal in the case of Ahluwalia Contracts (I) Ltd. vs. CCE, Noida (supra). The facts of those case are identical to the present. It is useful to reproduce the finding of the Tribunal in the Ahluwalia Contracts (I) Ltd. case :-
4.?It is seen that the appellants started classifying the service rendered by them under works contract service with effect from 1-6-2007 and started availing of the Composition Scheme. The adjudicating authority denied such re-classification on the ground that services under those works contracts had commenced prior to 1-6-2007 under CICS/CCS and as per Boards Circular No. 98/1/2008-S.T., dated 4-1-2008 Composition Scheme in respect of such contracts is not permissible. The issue whether for ongoing contracts which commenced prior to 1-6-2007 and Service Tax was paid under respective services, Composition Scheme could be availed of with effect from 1-6-2007 classifying the service under works contract service has been decided by Andhra Pradesh High Court in the case of Nagarujuna Construction Ltd. holding that for such ongoing contracts, the assessee cannot switch over to Composition Scheme. However, there can be no doubt that the classification of service is to be determined in terms of the nature of service rendered vis-`-vis the definition of various services as applicable on the date of rendition of service. The Boards circular dated 4-1-2008 is in disharmony with law to the extent it holds that with effect from 1-6-2007 the classification cannot be changed for ongoing projects even if the service rendered is more specifically covered thereunder. Thus even if the classification of service prior to 1-6-2007 in respect of ongoing contracts was under CICS/CCS, the same would be classifiable as works contract service (WCS) with effect from 1-6-2007 if the service rendered was more specifically covered thereunder and if the classification is held to be under WCS the benefit of Notification No. 1/2006-S.T. would not be applicable with effect from 1-6-2007 as the said notification is not applicable to works contract service. However, the benefit of Rule 2A of the Service Tax (Determination of Value) Rules, 2006 or any other applicable notification can be claimed by the appellants subject to producing the required evidence.
6. The appellant has fairly admitted that they will not be entitled to the benefit of the composition scheme w.e.f. 01/6/07. In the light of the decision of the Tribunal in the Ahluwalia Contracts (I) Ltd. case we find that the issue is no longer res-integra. They will be entitled to re-classify their services under Works Contract Scheme w.e.f. 01/6/07. They will also be entitled to the benefit of Rule 2A of the Service Tax Determination of Valuation Rules. However, we find that the issue needs to be remanded back to the original Adjudicating Authority for evaluating the claim of the appellant to the quantum of the benefit entitled to them under Valuation Rule 2A of the Service Tax Determination of Valuation Rules. For this purpose, we remand the matter to the Adjudicating Authority. The appellant is directed to produce all necessary documentation supporting their claim for the benefit under Rule 2A. The Adjudicating Authority is directed to consider such claims and decide the matter afresh after giving an effective opportunity to the appellant put forth his claim.
7. The appeal is allowed by way of remand.
(Order dictated and pronounced in the open court.) (S.K. Mohanty) Member (Judicial) (V. Padmanabhan) Member (Technical) PK ??
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