TMI Blog2019 (11) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... me. The appellant has arrived at the value of service portion of Works Contract Service as per Rule 2A (i) whereas the Department has proceeded to arrive at the value as per Rule 2A (ii) for the period after 01.07.2012 and under the Composition Scheme for the period prior to 01.07.2012. Rule 2A (ii) would apply only if the value is not determined under clause (i). The appellant in the present case has arrived at the value and also paid VAT as per the VAT Law. The value of transfer of property in goods has to be arrived at on the basis of purchase price of various goods, apportionment of overheads and profit margin. The appellant, being an assessee under the VAT Law, has to abide by the state law for payment of VAT. Thus, he can only arrive at the value of goods used in the Works Contract by applying the VAT Law after deducting the value arrived for payment of VAT; the remaining portion has been subjected to payment of Service Tax. When VAT has already been paid on the value of goods, the same cannot be subjected to levy of Service Tax again. The Hon ble Apex Court in the case of SAFETY RETREADING COMPANY (P) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, SALEM, M/S TYRESOLES ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rely consuming the materials for providing the services; that such consumption did not amount to sale and therefore, the appellant is not entitled to exclude the material value. 1.4 After due process of law, the Original Authority confirmed the demand, interest and imposed penalty under Section 78 of the Finance Act, 1994. Aggrieved by such order, the appellant is now before the Tribunal. 2.1 Ld. Counsel Shri. G. Natarajan appeared and argued on behalf of the appellant. He submitted that the appellant has discharged Service Tax for the disputed period from October 2008 to March 2013 as per the provisions of law. The main ground on which the demand has been raised is that there has been no sale of any goods since the appellant is only executing completion and finishing works. The works undertaken by the appellant in the nature of finishing services which is recognized as Works Contract Service for payment of Service Tax as well as for the purpose of VAT. Therefore, the observation in the Show Cause Notice that there is no sale of any goods is not legally correct. The allegation of the Department that the goods are only being consumed and that there is no tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CESTAT-MAD wherein it was held that once VAT is paid on 85% of the gross value as per the Tamil Nadu VAT Rules, 2007, payment of Service Tax on the remaining 15%, which represents the service portion of works contract, is in order. 2.4 He submitted that the demand for the period from October 2008 to March 2013 has been raised in the Show Cause Notice dated 17.04.2014 invoking the extended period of limitation by alleging suppression of facts. That the issue is only with regard to the method that has to be adopted for determining the value of taxable service and is entirely an issue of interpretation. There is no intention to evade payment of Service Tax and appellants had arrived at the value of taxable service in accordance with the provisions of Service Tax Rules, 2006 and the VAT Laws. Therefore, there is no justification for invoking the extended period of limitation and the demand up to March 2012 also cannot sustain on the ground of time-bar. 2.5 He prayed that the appeal may be allowed. 3.1 Ld. Authorized Representative (A.R.) Shri. B. Balamurugan appeared on behalf of the Department. He adverted to clause (c) of Rule 2A as it stood pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ―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 to in sub-clause (zzzza) of clause (105) of section 65 of the Act, shall be determined by the service provider in the following manner:- (i) Value of works contract service determined shall be equivalent to the gross amount charged for the works contract less the value of transfer of property in goods involved in the execution of the said works contract. Explanation.- For the purposes of this rule,- (a) gross amount charged for the works contract shall not include 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 said works contract; (b) value of works contract service shall include,- (i) labour charges for execution of the works; (ii) amount paid to a sub-contractor for labour and services; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rks, service tax shall be payable on forty per cent of the total amount charged for the works contract; (B) in case of works contract entered into for maintenance or repair or reconditioning or restoration or servicing of any goods, service tax shall be payable on seventy percent of the total amount charged for the works contract; (C) in case of other works contracts, not covered under sub-clauses (A) and (B), including maintenance, repair, completion and finishing services such as glazing, plastering, floor and wall tiling, installation of electrical fittings of an immovable property , service tax shall be payable on sixty per cent. of the total amount charged for the works contract; 7.2 Perusal of these provisions, as shown above, would indicate that Rule 2A continues after 2012 also and the Composition Scheme has been replaced and inbuilt in the Rules itself in a different form whereby the service portion in Works Contract is specified at a percentage of gross value based on the nature of activities on which normal Service Tax rate applies instead of a lower composition rate on the gross value under the erstwhile composition scheme. 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