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2022 (12) TMI 523 - HC - Service TaxConstitutional Validity of N/N. 7 of 2008 dated 01.09.2008 enhancing the rate of service tax from 2% to 4% - levy of additional burden of service tax upon the contracts for which the option under Notification No. 32 of 2007, dated 22nd May, 2007 as already been exercised by the appellant - applicability of composition scheme. Does the scheme contemplate a mode of exercising option and what would be the correct meaning that has to be assigned to the words “shall exercise option in respect of the works contract prior to payment of service tax”? HELD THAT:- In T. Azhakesan Versus State Tax Officer and Others [2021 (10) TMI 123 - MADRAS HIGH COURT], the Division Bench of the High Court of Madras considered a similar issue, but, arising under the provision of the Tamil Nadu Value Added Tax Act, 2006. The said Act also contained a similar provision stating that the option should be exercised by the dealer prior to payment of tax. Similarly, under the said Act, there was no prescribed form for exercising such option. In GE T and N India Limited Versus Commissioner of Central Excise and Service Tax, Large Tax Payer Unit, Chennai [2019 (12) TMI 858 - MADRAS HIGH COURT], identical issue was considered and the Division Bench approved the view taken by the tribunal in the case of Vaishno Associates Versus CCE & ST, Jaipur [2018 (3) TMI 417 - CESTAT NEW DELHI] wherein the court considered the composition scheme and pointed out that no format has been prescribed for making/exercising an option nor has it been specified as to whom the option must be addressed, the fact of the paying service at composition rate in the return filed by the service provider is enough indication to show that they have opted for payment under the works contract composition scheme. The payment of tax under the composition scheme upon notification of the scheme vide a notification no. 32 of 2007 dated 26.05.2007 by filing the return and paying tax at the compounded rate of 2% is sufficient compliance of exercise of option under the scheme and therefore the subject contracts for which tax had been remitted by the appellant at the rate of 2% is permissible and acceptable under law. Extended period of limitation - HELD THAT:- The disputed period can be divided into two the first of which being from March 2008 to March 2012. For this period, the show cause notice for the periods from March 2008 to March 2011 have all been issued after a long delay as the show cause notices were issued on 17.04.2013. The said show cause notice also covered the period from April 2011 to September 2011 and October 2011 to March 2011 but for such period the show cause notice was within the time permitted. The question would be whether extended period of limitation could have been invoked in the facts and circumstances of this case and courts have held that such extended period of limitation can be invoked only when that there is a deliberate intention to evade payment of tax and it does not empower the department to invoke the extended period on the sole ground of omission - the department invoking the extended period of limitation, for the period indicated above, is thoroughly flawed and illegal. Penalty u/s 78 of FA - HELD THAT:- The learned advocate submits that the court may consider the case and direct that the penalty should not be levied under Section 78 of the Act. We are not able to accede such a prayer as it is beyond the scope of the prayer sought for in the writ petition nor such contention appears to have been raised in the writ petition. However, we give liberty to the appellant to raise all contentions both on law and facts in the event there is proposal to levy penalty for the aforementioned period. The appellant has exercised the option prior to 01.03.2008 and therefore would be entitled to the compounded rate of tax at 2% for the relevant period and this cannot extend to the period from April 2012 to March 2013 which the appellant has conceded to pay tax at the enhanced rate along with the interest - Appeal allowed.
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