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TMI Blog2020 (11) TMI 798X X X X Extracts X X X X X X X X Extracts X X X X ..... irection, completely and permanently prohibiting the respondents, their servants and agents from taking any action against the Petitioner pursuant to Show Cause Notice F.No. STC/ 452/O&A/ SCN/ NJD/ 2006 dated 12.3.2007 and for the subject matter involved in this show cause notice; (C) That Your Lordships may be pleased to issue a Writ of Mandamus or any other appropriate writ, direction or order directing the 3rd Respondent Commissioner of Service Tax, Ahmedabad to return Rs. 2 lakhs pre-deposited by the Petitioner along with interest @6% per annum from the date of deposit till the actual payment to the petitioner; (D) That Your Lordships may be pleased to issue a Writ of Mandamus or any other appropriate writ, direction or order holding and declaring that the Petitioner was not liable to pay any service tax on the services involved in the present case and no 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner, when it realized that the services rendered by it was actually taxable under 'Works Contract Service' category, the petitioner applied for a registration for works contract service, which was granted by the respondent authorities in January, 2008. 3.5. The petitioner has thereafter paid service tax for the construction activities carried out by him under works contract service at an appropriate rate leviable for such taxable service and returns were filed by the petitioner under works contract service which were accepted and assessed by the respondent authorities. 3.6. It is the case of the petitioner that, during the period from October, 2005 to March, 2006, the petitioner paid service tax under the head 'commercial or industrial construction service', though no service tax was leviable at all, on the business activity of the 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 activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... availing abatement allowed under Notification No. 1/2006-ST dated 01.03.2006, but abatement in value under this notification was wrongly availed by the petitioner, as the condition for abatement under the notification was that the service provider should not have taken credit of duty paid on input services used for providing such taxable service. Since the petitioner had availed Cenvat credit of service tax paid on GTA service in March, 2006, objection was raised and the differential service tax denying the benefit of the notification dated 01.03.2006 was raised under the head 'commercial or industrial construction service' was supposed to be recovered with interest and penalty from the petitioner. 3.11. The petitioner thereafter submitted a reply dated 26.03.2007 to the show cause notice and explained that there was no 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 ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that there was no liability to pay service tax prior to 01.06.2007 because it was for the first time that the business activities of the petitioner, which were in the nature of works contract, had been brought under the levy of service tax w.e.f. 01.06.2007 by introducing a new service tax category. 3.15. The Appellate Tribunal by an order dated 22.06.2009 granted stay against the recovery on condition of deposit of Rs. 2,00,000/- by the petitioner. 3.16. The petitioner deposited Rs. 2,00,000/-. Thereafter, the question about propriety for levy of service tax on works contract for prior period came up before the Supreme Court in case of Larsen & Tourbo Ltd. and the Supreme Court in decision in the case of Commissioner of Central Excise and Customs, Kerala v. Larsen & Tourbo Ltd. reported 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er was brushed aside by observing that the order of the Mumbai Tribunal had no bearing on the issue before the Appellate Tribunal because the petitioner has separate registration at Mumbai. However, it is the case of the petitioner that the petitioner has only one place of business i.e. at Ahmedabad and only registration that the petitioner held was at Ahmedabad. 3.21. The petitioner has therefore, being aggrieved by such order passed by the Tribunal, which is contrary to the binding precedent of the judgment of the Supreme Court as well as order passed by the Appellate Tribunal in the case of the petitioner itself and other similar cases, has filed this petition, as the Tribunal ultimately remanded the matter back for verifying that whether the Cenvat credit of GTA services was reversed 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 Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial for achieving such object, should appropriately be classifiable under Works Contract Service and not under any of the other defined category of service, we do not find any merits in the impugned order for endorsing the views expressed therein." 4.3. Learned advocate therefore submitted that the Tribunal has erred in law in deferring with the decision of Coordinate bench holding that it was the decision of the Mumbai Tribunal. 4.4. Learned advocate for the petitioner further invited attention to the synopsis of dates, events and proposition filed before the Tribunal, which was not at all considered by the Tribunal while passing the impugned order, which read thus: 5. Heard both the sides and perused the records. Admittedly the Appellant were registered under 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Service Tax Appeal No. 379/2009 is based upon the decision of the Supreme Court, whereas, the Tribunal while passing the impugned order in Service Tax Appeal No. 107/2009 did not assign any reason for not following the settled legal position which is gross violation of the principles of natural justice, as held by this Court in case of Vadilal Gases Ltd. reported in 2016 (332) ELT 625 (Guj.) and Manek Chemicals Pvt. Ltd. reported in 2016 (334) ELT 302 (Guj.). 4.7. Learned advocate Mr. Dave therefore submitted that, the petitioners are in such circumstances constrained to invoke the extraordinary jurisdiction of this Court under Article 226 /227 of the Constitution of India for correcting such jurisdictional error, and also the redressal 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present in the transaction and the sale is distinctly discernible in the transaction. This does not however allow the State to entrench upon the Union List and tax services by including the cost of such service in the value of the goods. Even in those composite contracts which are by legal fiction deemed to be divisible under Article 366(29-A), the value of the goods involved in the execution of the whole transaction cannot be assessed to sales tax. As was said in Larsen & Toubr o v . Union o f India[(1993) 1 SCC 364] : (SCC p. 395, para "The cost of establishment of the contractor which is relatable to supply of labour and services cannot be included in the value of the goods involved in the execution of a contract and 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion would show; and second, the Notification dated 17-5-2010 issued by the Government of Haryana, Excise and Taxation Department, whereby certain rules of the Haryana Value Added Tax Rules, 2003 have been amended and a table has been annexed providing for "Percentages for Works Contract and Job Works" under the heading "Labour, service and other like charges as percentage of total value of the contract" specifying 15% for fabrication and installation of elevators (lifts) and escalators, is self-contradictory, for once it is treated as a composite contract invoking labour and service, as a natural corollary, it would be works contract and not a contract for sale. To elaborate, the submission that the element 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to be taken together for determining the amount to be paid as tax in respect of each building. In our considered view this position cannot be accepted. The intention of the legislature in a taxation statute is to be gathered from the language of the provisions particularly where the language is plain and unambiguous. In a taxing Act it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language. It is not the economic results sought to be obtained by making the provision which is relevant in interpreting a fiscal statute. Equally impermissible is an interpretation which does not follow from the plain, unambiguous language of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins under that head. No existing principle or provision at variance with them can be applied for determining the chargeable profits and gains. All transactions encompassed by Section 45 must fall under the governance of its computation provisions. A transaction to which those provisions cannot be applied must be regarded as never intended by Section 45 to be the subject of the charge. This inference flows from the general arrangement of the provisions in the Income Tax Act, where under each head of income the charging provision is accompanied by a set of provisions for computing the income subject to that charge. The character of the computation provisions in each case bears 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 'service' component of a works contract from the 'goods' component. It begins by working downwards from the gross amount charged for the entire works contract and minusing from it the value of the property in goods transferred in the execution of such works contract. This is done by adopting the value that is adopted for the purpose of payment of VAT. The rule goes on to say that the service component of the works contract is to include the eight elements laid down in the second Gannon Dunkerley case including apportionment of the cost of establishment, other expenses and profit earned by the service provider as is relatable only to supply of labour and services. 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 tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions made across the Bar, I find that the show cause notices issued to the petitioners, which are impugned in these writ petitions, cover the period from January, 2006 to June, 2010. During the said period, there were amendments to the Finance Act, 1994 with regard to the levy of service tax and, apart from the heads of 'commercial and industrial construction services'/'construction of residential complex services' that were recognised for the purposes levy of service tax, there was a new head of tax namely, 'works contract service', which was introduced in the statute with effect from 1-6- 2007. The issue of classification 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 'c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner could not contend for an alternate classification having already declared his service under the head of 'commercial and industrial construction services' /'construction of residential complex services'. In my view, the said reasoning of the adjudicating authority is erroneous, more so, in the light of the decision of the Supreme Court referred to above. I therefore quash Ext.P4 order, and direct the adjudicating authority to reconsider the matter in the light of the observations in this judgment. Needless to say that the petitioners shall be afforded an opportunity of hearing before the adjudicating authorities pass fresh orders, 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 "w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the appellant is not justified. The tax liability of the composite works contract has been a subject matter of large number of litigations and the final legal position was clarified only after the decision of the Hon'ble Apex Court, as above. In such situation, no penalty can be imposed on the appellant, especially when they have discharged service tax in terms of the provisions, as applicable during the relevant time and as per the understanding of such provision during the relevant time. As noted above, the appellants only contested this differential duty and penalties. No other issue is pressed during the submission by the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first time that the petitioner is not liable to pay service tax on works contract services provided by the petitioners prior to 01.06.2007. It was pointed out that the petitioner no.1 itself has registered for the services under the head of 'commercial or industrial construction services', and therefore, the petitioner cannot now say that the petitioner was not liable to pay service tax. 5.2. The learned advocate Mr. Bhatt submitted that, the issue before the adjudicating authority was the applicability of the notification dated 01.03.2006, as the petitioner availed Cenvat credit in March, 2006 from the 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 volunta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scope of CICS as reproduced hereinabove, Service Tax was correctly levied and paid as per the provisions of the Act. 9. I say and submit that in respect of para 16.1, 16.2 and 16.3, the contents thereof are denied. I say and submit that the activities of the Petitioner rightly fell under the category of CICS prior to 01.06.2007, wherein a new category of WC was provided under the provisions of the Act, and the Service Tax has been correctly levied and paid under the provisions of the Act. I say and submit that the Petitioner has taken benefit of Service Tax abatement 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner no.1 registered itself for the service tax under the head of 'commercial / industrial construction services', the petitioner cannot be fasten its liability to pay service tax on the services rendered by it as 'work contract' services. 6.2. The definition of taxable service as per Section 65 (105) (zzq) reads as under: Definitions. 65. In this Chapter, unless the context otherwise requires,- xxx 105. "Taxable service" means any service provided or (to be provided),- (zzq) to any person by, (any other person), in relation 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 relatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id amendment in the Finance Act, 1994, the Supreme Court in the case of L & T Ltd. (supra), after considering the decision of the Supreme Court in the case of Gannon Dunkerley reported in (1993) 1 SCC 364 held that the separation of the value of the goods contained in the execution of a works contract will have to be determined by working from the value of the entire works contract and deducting there from charges towards labour and services. The Apex Court therefore 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, c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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