2017 (12) TMI 835 - AT - Service Tax

Composition scheme - whether appellant is eligible to composition scheme under Rules 2007? - Held that - Admittedly the appellants are liable to Service Tax for the work executed in pursuance of the impugned contract only w.e.f. 01/06/2007 as such any payment of Service Tax prior to 01/06/2007 will not bar the appellants from following the procedure as available under 2007 Rules. Admittedly separate letter of intimation was not filed for availing the said scheme. However from the date of introduction of works contract service the appellants have started discharging service tax at the rate of 2 per cent availing the procedure under 2007 Rules - the appellants are entitled for Composition Scheme in the present case. With reference to correct rate of duty to be followed under the Composition scheme we note that there is no dispute that the appellants have to discharge Service Tax either at 2 per cent or at 4 per cent depending on the effective rate of duty applicable during the period of providing service. The appellant are not contesting this issue. Any short payments because of adopting lower rate are to be verified by the jurisdictional authorities for correct quantification. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility of the appellant for the composition scheme under Rules, 2007.
2. Dispute regarding the correct rate of duty applicable for the composition scheme during a specific period.

Issue 1 - Eligibility for Composition Scheme:
The appellants were engaged in providing Construction Services under a contract with M/s BHEL. The dispute arose when the revenue objected to the appellants changing the classification of service mid-contract. The appellants argued that their contract was of a composite nature involving supply of goods and services, making them eligible for the Works Contract Service classification with the composition scheme. The Hon'ble Supreme Court's decision in Larsen and Tubro Ltd. clarified that composite Work Contracts were liable to Service Tax only from 01/06/2007. The appellants had paid Service Tax under a different classification before this date but started paying under Works Contract Service after 01/06/2007. The Tribunal held that the appellants' payment at the composition rate and reflection in statutory returns satisfied the condition of exercising the option under the 2007 Rules. The Tribunal found the appellants entitled to the Composition Scheme as they had not availed any credit on inputs, which was not barred by the scheme.

Issue 2 - Correct Rate of Duty for Composition Scheme:
Regarding the dispute over the correct rate of duty applicable for the composition scheme during a specific period, the appellants acknowledged the change in the rate of duty from 2% to 4% and admitted to discharging the correct rate. They did not contest the issue of paying Service Tax at either 2% or 4% depending on the effective rate of duty applicable during the service period. The Tribunal directed the jurisdictional authorities to verify any short payments due to adopting a lower rate for correct quantification.

In conclusion, the Tribunal set aside the impugned order and allowed the appeals based on the eligibility of the appellants for the Composition Scheme under the 2007 Rules and the clarification on the correct rate of duty to be followed under the scheme.