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TMI Blog2012 (11) TMI 404X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant had paid service tax under the following categories of taxable services, namely: (a) Erection, commissioning or installation service under Section 65(105) (zzd) of the Finance Act, 1994 (hereinafter referred to as 'the Act'), b) Commercial or industrial construction service under Section 65(105) (zzq) of the Act, c) Construction of complex (residential complex) service under Section 65(105) (zzzh) of the Act. 4. Sub-sections 39(a), 25(b) and 30(a) of Section 65 of the Act define the above mentioned services as under: "39(a): erection, commissioning or installation; means any service provided by a commissioning and installation agency, in relation to,-- (i) erection, commissioning or installation of plant machinery, equipment or structures whether pre-fabricated or otherwise; or (ii) installation of - (a) electrical and electronic devices, including wirings or fittings therefore; or (b) plumbing, drain laying or other installations for transport of fluids; or (c) heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work; or (d) thermal insulation, so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead of paying full rate of service tax after availing of CENVAT credit of excise duties paid on inputs, had opted to claim the benefit of Notification No. 1/2006 -ST dated 1.3.06, whereby service tax was required to be paid only on 33% of the total value, subject to the condition of non availment of CENVAT credit on inputs, capital goods and input services. 8. With effect from 01.06.2007, vide Notification No. 23/2007 dated 22.05.2007, sub-section (105) of Section 65 of the Act was amended and Clause (zzzza) was introduced. This clause reads as follows: "(zzzza) Taxable service means any service provided or to be provided to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams. Explanation:-- For the purposes of this sub-clause, "works contract" means a contract wherein, -- (i) transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and (ii) such contract is for the purposes of carrying out, -- (a) erection, commissioning or installation of plant, m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gory of services would work out to be approximately 3.96% of the gross amount. 11. Rule 3 of the 2007 Rules, being relevant, is extracted below: "3. (1) Notwithstanding anything contained in Section 67 of the Act and Rule 2A of the Service Tax (Determination of Value) Rules, 2006, the person liable to pay service tax in relation to works contract service shall have the option to discharge his service tax liability on the works contract service provided or to be provided, instead of paying service tax at the rate specified in Section 66 of the Act, by paying an amount equivalent to four per cent of the gross amount charged for the works contract. Explanation:-- For the purpose of this rule, gross amount charged for the works contract shall not include Value Added Tax (VAT) or sales tax, as the case may be, paid on transfer of property in goods involved in the execution of the said works contract. (2) The provider of taxable service shall not take CENVAT credit of duties or cess paid on any inputs, used in or in relation to the said works contract, under the provisions of CENVAT Credit Rules, 2004. (3) The provider of taxable service who opts t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for claiming benefit of paying service tax at the rate of 4% of the gross amount charged for the works contract instead of paying service tax at the rate specified in Section 66 of the Act, the appellant ought to have exercised its option before payment of service tax in respect of the works contract. The appellant had not exercised its option before payment of service tax and the taxable services, which were falling within Clauses (zzd), (zzq) and (zzzh) of Section 65 (105) of the Act, were falling within the newly introduced Clause (zzzza) of Section 65(105) of the Act. In these circumstances, the petition was dismissed by the High Court. 16. It is against the dismissal of the said petition that the present appeal has been filed by the appellant. The learned counsel for the appellant submitted before us that upholding the view taken by the High Court would result in gross discrimination between assessees who had paid tax @3.96% prior to 1.6.2007, as opposed to the contractors who are similarly placed but did not pay any tax prior to 1.6.2007 and who would now be paying tax at a lower rate. 17. The learned counsel appearing for the appellant submitted that the Impu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Impugned Circular and not the provisions of Rule 3 (3) of the 2007 Rules. Even without giving effect to the Impugned Circular, the provisions of the amended Rules would remain and force which would not permit the appellant to change the method with regard to payment of tax which was in vogue prior to 1st July, 2007. He submitted that there was no dispute to the fact that the agreement with regard to the works contract had been entered into before 1st June, 2007 i.e. when the amended provision of Rule 3 (3) of the 2007 Rules was not in force. As the appellant had already paid service tax before 1st June, 2007 on the basis which was applicable at the relevant time i.e. before 1st June, 2007, the appellant is not entitled to opt for the scheme provided under the provisions of Rule 3 of the 2007 Rules. 23. He lastly emphasized on the fact that reclassification is always permitted and the State has a right to reclassify services and only in pursuance of the said reclassification, the provisions of Rule 3 (3) of the 2007 Rules would not apply to the case of the appellant. He further added that not availing CENVAT credit is not a relevant issue. He emphasized on the fact that beca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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