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2020 (8) TMI 295 - AT - Service TaxInterpretation of statute - Method of computation of tax liability - Works Contract Service - disputed period is 16.06.2005 to 31.03.2009 - abatement under N/N. 18/2005-ST read with subsequent Notification no. 1/2006-ST - demand alongwith interest and penalty - HELD THAT:- When the impugned order was passed, the law was not settled as regards classification of service, particularly in the case of composite contract involving supply of both labour and material. Even different benches of this Tribunal were having difference of opinion with regard to taxability of works contract under the Finance Act prior to 01.06.2007 when Section 65 (105) (zzzza) was introduced in the Finance Act providing for bifurcation of a composite contract and taxing of the service element - The law was finally settled in August, 2015 by Hon‟ble Supreme Court in the case of COMMISSIONER, CENTRAL EXCISE & CUSTOMS VERSUS M/S LARSEN & TOUBRO LTD. AND OTHERS [2015 (8) TMI 749 - SUPREME COURT] whereby it was held that in the cases of composite contract involving labour and materials, the same are not taxable under the existing category of services prior to 01.06.2007. It was further held that the service in such cases is classifiable only under the heads “Works Contract Service‟ and tax leviable w.e.f. 01.06.2007 (and not prior to this date). Benefit of abatement - HELD THAT:- The appellant shall be entitled to deduction of material component actually supplied by them in execution of the works contract, which is verifiable from their sales tax record/ assessment order. As regards construction of club, it is held that the same is exempt from service tax being non-commercial in nature. Levy of penalty - HELD THAT:- The issue involved is of interpretation in nature and there was lot of confusion prevailing with respect to taxability of works contract, and law was settled finally in August, 2015. Therefore, the penalty under Section 76 and 78 are not sustainable and are liable to be set aside. Accordingly, the same is set aside. The appellant is not entitled to composition scheme as they have not opted for the same; secondly, they are disputing the addition of material components supplied free by the principal as required under the composition scheme; the details and actual cost of the material thus supplied needs to be arrived at. Further, composition scheme is optional at the option of the assessee - Service Tax liability shall be recomputed for the period from 01.06.2007 under Rule 2A of Service Tax (Determination of Value) Rules. No Service Tax is chargeable for the period prior to 01.06.2007 under the head “Works Contract Service‟. However, if the appellant has collected service tax from the principal and deposited the same, they shall not be entitled for refund for the period prior to 01.06.2007 - appeal allowed by way of remand.
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