TMI Blog2020 (11) TMI 798X X X X Extracts X X X X X X X X Extracts X X X X ..... as taxable person in relation to the execution of the works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams. The Apex Court in GANNON DUNKERLEY CO. VERSUS STATE OF RAJASTHAN LARSEN TOUBRO LTD. UNION OF INDIA [ 1992 (11) TMI 254 - SUPREME COURT ] was of the opinion that the service tax charging Section itself must lay down with specificity that the levy of the service tax can only be on works contracts, and the measure of tax only be on that portion of works contracts which contain a service element which is to be derived from the gross amount charged for the works contract less the value of the property in goods transferred in the execution of the works contract. In such circumstances, the Apex Court held that when the legislature has introduced the concept of service tax on indivisible works contracts then such contracts were never intended to the subject matter of the service tax, and therefore, such contracts, not being exempt under the Finance Act, 1994, cannot be said to fall within its tentacles, as which was never the intention of Parliament. The Apex Court, therefore, held that the levy of service tax on works co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action whatsoever by the Respondents is permissible against the Petitioner for the works contract service involved in the present case involving the period from October, 2005 to March, 2006; (E) Pending hearing and final disposal of the present petition, Your Lordships may be pleased to stay recovery of any amount(s) from the Petitioner pursuant to final order No. A/10973/2019 dated 3.6.2019, and be further please to stay implementation and execution of this final order No. A/10973/2019 dated 3.6.2019 made by the Appellate Tribunal, Ahmedabad. (F) An ex-parte ad-interim relief in terms of Para-23(E) above may be kindly be granted: (G) Any other further relief as may be deemed fit in the facts and circumstances of the case may also please be granted. 3.The facts giving rise to the present petition may be summarized as under: 3.1. The petition is filed by the Private Limited Company incorporated under the provisions of the Companies Act, 1956 through its Director petitioner no.2. The petitioner company is engaged in the business of construction of buildings and civil structures for last several decades. 3.2. It is the case of the petitioner that, petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioner at that time though the petitioner rendered the works contract service which was liable for levy of such service tax w.e.f. 01.06.2007. 3.7. According to the petitioner, petitioner was receiving services of goods transport operators for bringing construction and other materials at its work site in relation to its business activity. Goods transport agency service was made taxable service w.e.f. 01.01.2005, but the Central Government has shifted the liability to pay the service tax on Goods Transport Agency (GTA) service to the person paying freight, by virtue of reverse charge mechanism. The petitioner was also, therefore, liable to pay service tax under reverse charge mechanism as recipients of goods transport agency service from January, 2005. As the petitioner was not aware about such reverse charge mechanism made applicable for recipients of goods transport agency services, the petitioner had initially not paid service tax on such services received and used by it. 3.8. By letter dated 08.03.2006, the Superintendent of Service Tax informed the petitioner about its liability to pay the service tax on Goods Transport Agency (for short GTA ) services under rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... violation of condition of the Notification in not taking Cenvat credit of service tax paid on input services because the Cenvat credit taken in the month of March, 2006 was actually in respect of service tax paid for input services availed and utilized from January, 2005 to February, 2006 but credit was taken in March, 2006 only, because the petitioner had paid service tax for past period in March, 2006. It was further submitted by the petitioner that Cenvat credit taken and utilized in March, 2006 was not in respect of input services used for providing taxable services on which service tax was being paid by the petitioner, as there was no condition in the notification allowing abatement in value that benefit of the notification would be inadmissible even if Cenvat credit of service tax on any other input services, i.e. input services not used for providing the taxable services under assessment was taken. However, the Joint Commissioner of Service Tax who was also the adjudicating authority did not accept the explanation tendered by the petitioner and confirmed the service tax liability on the differential value for the month of March, 2006 by passing Order In Original (for short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in 2015 (39) STR 913 (SC) held that, works contract service was made liable to service tax only w.e.f. 01.06.2007, and therefore, service tax was not leviable on works contract for the period prior thereto. Following the decision of the Supreme Court, various other High Courts and Tribunals have applied this ratio. Therefore, when the appeal filed by the petitioner came up for hearing on 11.02.2019, the petitioner submitted before the Appellate Tribunal, Ahmedabad to follow the decision of the Supreme Court and High Courts and Tribunal including the Ahmedabad Tribunal. The Appellate Tribunal after concluding the hearing on 11.02.2019 in Appeal No. E./107/2009 and reserved the order. 3.17. It is the case of the petitioner that in one more appeal filed by the petitioner being Appeal No. ST/379/2009 involving the same issue as to whether the service tax was recoverable from the petitioner prior to 01.06.2007 or not was also pending before the Appellate Tribunal, Ahmedabad. When the said appeal came up for hearing on 02.04.2019 by the bench comprising of two Hon ble visiting members, the appeal was allowed by pronouncing the order in the open court, with a clarification that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eversed or not to the adjudicating authority. 4.1. Learned advocate Mr. Paresh M. Dave appearing for the petitioners submitted that the facts of the case are glaring as the Tribunal could not have decided the Appeal No. ST/107/2009 contrary to the decision of the Supreme Court and the Appellate Tribunal in the case of the petitioner itself, and therefore, the impugned order passed by the Tribunal in Appeal No. ST/107/2009 is illegal and without jurisdiction and is also in violation of the principles of natural justice. 4.2. Mr. Dave submitted that the services rendered by the petitioner no.1 company are admittedly that of works contract and when the Apex Court in the case of L T (supra) has conclusively held that service tax on works contract was leviable only from 01.06.2007, the Appellate Tribunal did not have jurisdiction to decide otherwise to the law laid down by the Supreme Court and uphold the demand of service tax on works contract service rendered by the petitioner for the period up to March, 2006. It was further submitted that, another Bench of the Appellate Tribunal in the case of the petitioner no.1 itself on the basis of the judgment of the Supreme Court in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the category of construction service and no dispute was raised by them regarding classification of service. Even though the category of Works Contract came into effect from 01.06.2007, they applied for said category only in January, 2008. They never contested their classification of services before authorities. They had paid service tax on GTA Services under reverse charge mechanism and also availed credit of same. The Appellant s first contention that the credit was of service tax on GTA pertained to the period till Feb 2006 and the service tax was paid on construction Services in March 2006 hence both are not reliable is not correct. Whatever services of GTA were availed by them was in respect of Construction service and the exemption on value which is in excess of 33% was availed by them continuously. Obviously the tax on construction services paid by them was in respect of continuous service of Construction activity. The construction activity was not initiated and completed in March 2006, therefore the GTA services before March 06 has clear linkage for the service tax paid on construction service in March 06. We also find that the Appellant did not contest the levy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of grievance for gross violation of principles of natural justice that has resulted in exfacie illegal order against the petitioner instead of filing appeal before this Hon ble Court under the provisions of Central Excises Act. 4.8. Mr. Dave on merits submitted that, the services rendered by the petitioner are admittedly that of works contract , and there is absolutely no dispute on the nature of service because the petitioner has been given a registration for the works contract service in January, 2008 for the same activities / services rendered by the petitioner. 4.9. It was also submitted that, neither the Commissioner (Appeals) nor the Appellate Tribunal raised any dispute about the correct classification of the services rendered by the petitioner. Moreover, it was pointed out that, as per the decision of the case in L T Ltd. (supra) no service tax was leviable or recoverable on works contract services prior to 01.06.2007 under any other category of taxable service. It was therefore submitted that the Tribunal has no jurisdiction to uphold demand of service tax on the business activities / services of the petitioner for the period prior to 01.06.2007 when the busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the cost of establishment which is relatable to supply of material involved in the execution of the works contract only can be included in the value of the goods. For the same reason the Centre cannot include the value of the SIM cards, if they are found ultimately to be goods, in the cost of the service. As was held by us in Gujarat Ambuja Cements Ltd . v . Union o f India [(2005) 4 SCC 214] , SCC at p. 228, para 23:- This mutual exclusivity which has been reflected in Article 246(1) means that taxing entries must be construed so as to maintain exclusivity. Although generally speaking, a liberal interpretation must be given to taxing entries, this would not bring within its purview a tax on subject-matter which a fair reading of the entry does not cover. If in substance, the statute is not referable to a field given to the State, the court will not by any principle of interpretation allow a statute not covered by it to intrude upon this field. (at paras 88 and 89) 17. We find that the assessees are correct in their submission that a works contract is a separate species of contract distinct from contracts for services simpliciter recognized by the world of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of labour and service can be deducted from the total contract value without treating the composite contract as a works contract is absolutely fallacious. In fact, it is an innovative subterfuge. We are inclined to think so as it would be frustrating the constitutional provision and, accordingly, we unhesitatingly repel the same. (at para 60) 19. In Larsen Toubro Ltd. v. State of Karnataka, (2014) 1 SCC 708, this Court stated:- In our opinion, the term works contract in Article 366(29- A)(b) is amply wide and cannot be confined to a particular understanding of the term or to a particular form. The term encompasses a wide range and many varieties of contract. Parliament had such wide meaning of works contract in its view at the time of the Forty-sixth Amendment. The object of insertion of clause (29-A) in Article 366 was to enlarge the scope of the expression tax on sale or purchase of goods and overcome Gannon Dunkerley (1) [ State of Madra s v . Gannon Dunkerle y and Co. (Madras) Ltd., AIR 1958 SC 560 : 1959 SCR 379] . Seen thus, even if in a contract, besides the obligations of supply of goods and materials and performance of labour and services, some ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he statute. Words cannot be added to or substituted so as to give a meaning to the statute which will serve the spirit and intention of the legislature. The statute should clearly and unambiguously convey the three components of the tax law i.e. the subject of the tax, the person who is liable to pay the tax and the rate at which the tax is to be paid. If there is any ambiguity regarding any of these ingredients in a taxation statute then there is no tax in law. Then it is for the legislature to do the needful in the matter. This construction, in our considered view, amounts to supplementing the charging section by including something which the provision does not state. The construction placed on the said provision does not flow from the plain language of the provision. The proviso requires the exempted property to be subjected to tax and for the purpose of valuing that property alone the value of the other properties is to be taken into consideration. But, if in doing so, the said property becomes taxable, the Act does not provide at what rate it would be taxable. One cannot determine the rateable value of the small property by aggregating and adding the value of other prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a relationship to the nature of the charge. Thus the charging section and the computation provisions together constitute an integrated code. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section. Otherwise one would be driven to conclude that while a certain income seems to fall within the charging section there is no scheme of computation for quantifying it. The legislative pattern discernible in the Act is against such a conclusion. It must be borne in mind that the legislative intent is presumed to run uniformly through the entire conspectus of provisions pertaining to each head of income. No doubt there is a qualitative difference between the charging provision and a computation provision. And ordinarily the operation of the charging provision cannot be affected by the construction of a particular computation provision. But the question here is whether it is possible to apply the computation provision at all if a certain interpretation is pressed on the charging provision. That pertains to the fundamental integrality of the statutory scheme provided for each head. (at pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . And, where value is not determined having regard to the aforesaid parameters, (namely, in those cases where the books of account of the contractor are not looked into for any reason) by determining in different works contracts how much shall be the percentage of the total amount charged for the works contract, attributable to the service element in such contracts. It is this scheme and this scheme alone which complies with constitutional requirements in that it bifurcates a composite indivisible works contract and takes care to see that no element attributable to the property in goods transferred pursuant to such contract, enters into computation of service tax. 27. In fact, the speech made by the Hon ble Finance Minister in moving the Bill to tax Composite Indivisible Works Contracts specifically stated:- State Governments levy a tax on the transfer of property in goods involved in the execution of a works contract. The value of services in a works contract should attract service tax. Hence, I propose to levy service tax on services involved in the execution of a works contract. However, I also propose an optional composition scheme under which service tax will be l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication of composite services for the purposes of levy of service tax has been clarified by the Supreme Court in the decision referred to above, and the Supreme Court has made it clear that for period prior to 1-6-2007, in the case of composite works contract services, there was no enabling provision in the Finance Act, 1994, which enabled the authorities administrating the levy of service tax under the Act, to artificially split up the components in a composite contract into such portions as would merit classification under the heads of 'commercial and industrial construction services'/'construction of residential complex services', for the purposes of levying a tax on those portions alone. The said decision is significant in the matter of classification of composite services because, one would have to now ascertain the nature of the service in question and then proceed to determine whether it is a composite service or not. If it is a composite service, then the question of classification of the service would also have to be gone into. It would be incumbent upon the adjudicating authorities under the Act to consider these aspects before confirming any demand based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, as directed. 4.12. The reference was also made to the decision of the Principal Bench of Tribunal, New Delhi in the case of B.R. Kohli Construction Pvt. Ltd. v. Commissioner of S.T., New Delhi reported in 2017 (5) G.S.T.L. 182 (Tri.- Del.), wherein, the Tribunal has followed the decision of the Supreme Court in case of L T Ltd., and held as under: 4. We have heard both the sides and perused the appeal records. Admittedly, the contracts executed by the appellants are composite in nature and are rightly to be classified under tax entry works contract service . As held by Hon'ble Supreme Court in Larsen Toubro Limited (supra) there is no liability to service tax in respect of indivisible, composite works contract prior to 1.6.2007. The appellants are not contesting their service tax liability under works contract service after 1.6.2007. The dispute is only relating to their entitlement to pay the said tax in terms of the composition scheme of 2007. The Original Authority held that the appellants switched over from construction service to works contract service' without intimating the service tax department and thus contravened the provisions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant. Accordingly, we allow the appeal with reference to this differential service tax and the penalties. The appeal is accordingly disposed of. 4.13. Learned advocate for the petitioner thereafter relied upon the decision of the Delhi Tribunal in case of Vistar Construction Pvt. Ltd. v. Commissioner of S.T., New Delhi reported in 2016 (44) S.T.R. 675 (Tri.-Del.), wherein the Tribunal has held as under: 4. We find no favour with the above contention of the learned DR. A reading of the impugned order clearly shows service were being provided by the appellant in terms of the works contract orders. No doubt the dispute relates to the valuation of the said services but the declaration of law by the Hon ble Supreme Court in the case of CCE CUS., Kerala v. Larsen Toubro Ltd. referred (supra) would equally apply to the facts of the present case laying down with works contract was not taxable prior to 1.6.2007. It is well settled law that the law declared by the highest court of the country has to be interpreted in such a manner as if the same was the law, even prior to declaration of the same by Hon'ble Supreme Court. As such, we find favour with the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he GTA services. Therefore, according to the adjudicating authority, the petitioner was not entitled to the benefit of notification dated 01.03.2006 with regard to the abated value on the ground that the petitioner availed the Cenvat credit. In such circumstances, both the Commissioner (Appeals) as well as the Tribunal were justified in holding that the petitioner was not liable to the benefit of the notification dated 01.03.2006. It was submitted that, the petitioner could not have raised a contention of not liable to pay service tax, despite the fact that the petitioner had voluntarily registered under the category of commercial / industrial construction services under the provisions of the Act, from 16.06.2005 and was paying service tax since 2005 under the said head of service tax . 5.3. The learned advocate for the respondents relied upon the following averments made in the affidavit-in-rely filed on behalf of the respondent nos. 1 and 3: 8. I say and submit that in respect of para no. 15, 15.1 and 15.2, the contents thereof are denied. I say and submit that the contention of the Petitioner that the business of the Petitioner admittedly did not fall under the headin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement under the provisions of the Notification no. 15/2004-ST dtd. 10.09.2004 and subsequent notification No. 01 /2006-ST dtd. 01.03.2006. I say and submit that the Petitioner has filed returns in the form ST-3 since its registration from 01.11.2004 under the heading of CICS. I say and submit that the Petitioner had never disputed this classification, and that the same was opened for the first time in submissions before the Commissioner (Appeals) by way of additional written grounds at the time of hearing on 24.11.2008. I say and submit that the Petitioner had never raised any objections in respect of its services being classified under CICS since it was registered in the year 2004, the contention of the petitioner that the services did not fall under the heading of CICS is an after-though, in as much as it was raised for the first time when a dispute was opened with respect to wrongful availment of benefit of abatement under the notifications as referred to hereinabove, as the petitioner had availed both options simultaneously and violated the terms of the Notifications as referred hereinabove and the same may therefore not be considered by this Court. 5.4. Relying upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation to (commercial or industrial) construction service. 6.3. Section 65 (25)(b) of the Finance Act, 1994 defines commercial or industrial construction services as under: (25b) Commercial or industrial construction means- (a) construction of a new building or a civil structure or a part thereof or (b) construction of pipeline or conduit; or (c) completion and finishing services such as glazing,plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services, in relation to building or civil structure; or (d) repair, alteration, renovation or restoration of; or similar services in relation to, building or civil structure, pipeline or conduit, which is (i) used, or to be used, primarily for; or (ii) occupied, or to be occupied, primarily with, or (iii) engaged, or to be engaged, primarily in, commerce or industry, or work intended for commerce or industry, but does not include such services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams;] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arging Section itself must lay down with specificity that the levy of the service tax can only be on works contracts, and the measure of tax only be on that portion of works contracts which contain a service element which is to be derived from the gross amount charged for the works contract less the value of the property in goods transferred in the execution of the works contract. In such circumstances, the Apex Court held that when the legislature has introduced the concept of service tax on indivisible works contracts then such contracts were never intended to the subject matter of the service tax, and therefore, such contracts, not being exempt under the Finance Act, 1994, cannot be said to fall within its tentacles, as which was never the intention of Parliament. The Apex Court, therefore, held that the levy of service tax on works contract was non-existent prior to 01.06.2007. 6.6. In view of the above dictum of law, which is followed by all the other High Courts and the Tribunals including the Coordinate Bench of the Appellate Tribunal in the Service Tax Appeal No. 379/2009 in the case of the petitioner itself, the Tribunal could not have arrived at a contradictory finding ..... X X X X Extracts X X X X X X X X Extracts X X X X
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