9911796707
TMI Blog2015 (1) TMI 455X X X X Extracts X X X X X X X X Extracts X X X X ..... under the category of 'Construction of Commercial/Industrial Complex Service' to them. For the services so provided the appellants had been paid Rs. 1,86,375/- on 1-3-2007, Rs. 92,39,410/- in 2007-08 and Rs. 14,86,188/- in 2008-09. Accordingly, the appellants were requested to get themselves registered and to intimate the quantum of taxable value of the services provided by them and also provide copies of the Balance Sheets for the above mentioned period to confirm the value of the taxable services provided which they failed to provide. 2.1 The appellants were issued show cause notice proposing recovery of service tax of Rs. 4,37,476/- under Section 73 of the Finance Act, 1994 by invoking the extended period of limitation, along with interest under Section 75 of the Act, besides proposing penalty under Section 76, 77 and 78 of the Act. 2.2 The adjudicating authority confirmed the demand of Rs. 4,04,846/- out of proposed demand of Rs. 4,37,476/- by allowing the benefit of cum service tax and ordered recovery of interest thereon under Section 75 of the Act. Penalty of Rs. 2,02,423/- under Section 76 of the Act, Rs. 10,000/- under Section 77 of the Act and Rs. 4,04,846/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces' which were brought under the service tax net w.e.f. 1-6-2007 only, and since the services had been wrongly classified, the demand was not sustainable. Further, it is contested that had the services been classified under 'Works Contract Service' the demand would have been for a lesser amount. 6. I thus, find that the issue needs decision on the following two issues : i. whether the services provided by the appellants during the period of demand fell under the category of 'Construction of Commercial/Industrial Complex service' when the contracts allotted were 'Works contracts'; ii. whether they were entitled to the benefit of the payment of service tax under the composition scheme at the rates applicable during the relevant period. 7. On the issue of classification, I observe that 'Construction Services' had been brought under the service tax net w.e.f. 10-9-2004. The definition did not specify any exclusion on the basis of the nature of the contracts, whether they were 'works contract' or contracts for services only, but only specified the nature of services provided by a service provider. Resultant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts", "Residential Construction Service Contracts" and "EPC Contracts" involving transfer of property in goods on which Sales Tax/VAT is chargeable. But it does not mean that these contracts were not liable to Service Tax prior to 1-6-2007 as, as discussed above, "erection, installation or commissioning services", "commercial or industrial construction service", Residential constructions services were taxable even prior to 1-6-2007, even if the same involved use/supply of goods on which Sales tax/VAT was payable. Similarly in respect of EPC contracts which are divisible contracts for design & engineering, procurement of goods, erection, installations & commissioning, service tax was chargeable even prior to 1-6-2007 on these taxable service component. The taxable services covered by Section 65(105)(zzza) and the services covered by Section 65(105)(zzd) [erection, installation or commission services], Section 65(105)(zzq) (Commercial or industrial construction service) and Section 65(105)(zzzh) [residential construction service] are overlapping. While w.e.f. 1-6-2007, following the principle of harmonious construction, it can be said that while Section 65(105)(zzzza) would cover th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax prior to 1-6-2007, the petitioner is denied benefits under the composition scheme, under the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 ('2007 Rules'). The challenge is on the ground that the impugned circular is irrational, discriminatory, ultra vires Sec. 65(105)(zzzza) of the Finance Act, 1994 ('the Act') and inconsistent with the objects of Rule 3(3) of the 2007 Rules. 6. On a true and fair construction of the clarification contained in the impugned circular (by way of amendment to the earlier circular dated 23-8-2007), a service provider who paid service tax prior to 1-6-2007 for the taxable services such as erection, commission or installing services, commercial or industrial construction services or construction of complex services, as the case may be, is not entitled to avail the composition scheme under the 2007 Rules." 8.2.1 The above judgment passed by the Hon'ble High Court of Andhra Pradesh was upheld by the Hon'ble Supreme Court reported as 2012 (28) S.T.R. 561 (S.C.). 8.3 Thus, even the ongoing contract, even if it involved supply/use of material by the contractor, for construction would be aptly classifiable un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o interference on this count. Thus, the first issue stands decided against the appellants. 9. Coming to the second issue, I find that the appellants have contested that had correct classification been made by the department the demand would have been on the lower side. In this regard I find that as I have held in the preceding para that the services provided by the appellants w.e.f. 1-6-2007 would be aptly classifiable under 'Works Contract Service', therefore, in case the appellants fulfil the conditions laid down in the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 (for brevity 'the Composition Scheme') their liability for the period from 1-6-2007 onwards, ought to be assessed under the Rules thereunder. 9.1 I observe that admissibility to pay service tax under Rule 3(1) of the Composition Scheme is subject to the fulfillment of conditions envisaged under Rule 3(2), 3(2A), 3(3) and 3(4) of the Composition Scheme. I observe that there cannot be any allegation that the appellants had taken any cenvat credit on the inputs and input services used in the provision of the taxable service as they were not registered with the department. Hence the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter that date. 3. As regards applicability of composition scheme, the material fact would be whether such a contract satisfies Rule 3(3) of the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007. This provision casts an obligation for exercising an option to choose the scheme prior to payment of service tax in respect of a particular works contract. Once such an option is made, it is applicable for the entire contract and cannot be altered. Therefore, in case a contract where the provision of service commenced prior to 1-6-2007 and any payment of service tax was made under the respective taxable service before 1-6-2007, the said condition under rule 3(3) was not satisfied and thus no portion of that contract would be eligible for composition scheme. On the other hand, even if the provision of service commenced before 1-6-2007 but no payment of service tax was made till the taxpayer opted for the composition scheme after its coming into effect from 1-6-2007, such contracts would be eligible for opting of the composition scheme." (emphasis supplied by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s notified by Government - Use of words "shall" and "be liable" in Section 11A(1) ibid indicating absence of option and interest chargeable in all cases of non-payment or short payment - Interest charged in original order upheld - Section 11AB ibid. - Interest is a civil liability of assessee who has retained amount of public exchequer with himself and which ought to have gone in the pockets of Central Government much earlier. Interest on duty evaded is payable and the same is compulsory even though evasion of duty is not mala fide or intentional. [paras 1, 7, 10, 11].... ..........7. Considering the scheme together, it is evident that interest chargeable u/s. 11AB is a sort of civil liability of the assessee, who has failed to pay the duty or who has short paid the duty. This is irrespective of the fact whether such non-payment/short payment is innocent or mala fide. ..... " 11. The appellants have also contested that the demand was time barred, though no reason whatsoever has been attributed for their claim. On the contrary I observe that the appellants suppressed the fact of provision of services from the department and in spite of initiation of investigations, and repeat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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