2019 (8) TMI 1186 - AT - Service Tax

Works Contract - Construction services - it was alleged that that the appellant has paid the service tax only on the civil construction part of the contract and that has artificially bifurcated the turnkey project into three separate contracts - HELD THAT - The findings of this Bench for the previous period M/S. ALSTOM T AND D INDIA LTD. VERSUS COMMISSIONER OF GST AND CENTRAL EXCISE CHENNAI 2018 (9) TMI 1669 - CESTAT CHENNAI on similar issue has held that the appellant will be entitled to the benefit of abatement under Sl.No. 7 of the Notification ibid. - demand do not sustain. Benefit of Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007 - prior intimation of such option as per Rule 3 to the department not filed - HELD THAT - In the above stated case it was held that it is only a procedural one and that the substantial benefit cannot be denied for procedural lapse - demand do not sustain. Appeal allowed - decided in favor of appellant.

Summary

Issues involved: Allegation of artificially dividing turnkey project into contracts for service tax payment and claiming benefit under Works Contract (Composition Scheme) Rules without prior intimation.

Analysis:

1. Allegation of Artificially Dividing Turnkey Project: The appellant was engaged in manufacturing transformers and electrical switchgears supplied to Electricity Boards. The issue revolved around the allegation that the appellant artificially divided the turnkey project into three contracts and paid service tax only on the civil construction part. The Tribunal analyzed the contracts for supply, erection, and civil works separately. It was observed that the Revenue did not combine the contracts into one mega turnkey project and did not assess them as a single works contract. Consequently, the Tribunal held that the appellant was entitled to the benefit of abatement under the relevant notification. The adjudicating authority's classification based on ST-3 returns was deemed erroneous, and the demand on this count was set aside based on the Tribunal's previous decision for the same assessee in a similar matter.

2. Claiming Benefit under Works Contract (Composition Scheme) Rules: The second issue pertained to the appellant claiming the benefit of Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007 without filing prior intimation to the department. The Tribunal referred to a previous decision in Vaishno Associates where it was held that failure to file prior intimation was a procedural lapse and should not deny the substantial benefit. Following this precedent, the Tribunal concluded that the demand on this count also could not be sustained. As the Bench had already decided on both these issues for the appellant in the previous period, the current appeals were allowed, and the impugned orders were set aside, maintaining consistency with the earlier well-considered decision.

In conclusion, the judgment addressed the issues of artificially dividing a turnkey project into contracts for service tax payment and claiming the benefit under Works Contract (Composition Scheme) Rules without prior intimation. The Tribunal found in favor of the appellant based on previous decisions and set aside the demands, emphasizing the correct classification and entitlement to abatement under the relevant provisions. The consistent approach taken by the Tribunal ensured fairness and adherence to legal principles in resolving the disputes presented in the appeals.