TMI Blog2022 (6) TMI 303X X X X Extracts X X X X X X X X Extracts X X X X ..... ERNMENT OF INDIA [ 2010 (6) TMI 91 - ANDHRA PRADESH HIGH COURT] which involved identical issue. The Hon ble High Court, while deciding the applicability of Rule 3(3) of the Composition Scheme discussed the case of ongoing works contracts which were earlier being classified under the Residential Complex Services . It is pertinent to mention that in the appellant s own case the Hon ble Gujarat High Court in JMC PROJECTS (INDIA) LTD. VERSUS COMMISSIONER OF SERVICE TAX [ 2014 (5) TMI 106 - GUJARAT HIGH COURT] categorically held that in respect of ongoing projects as on 01.06.2007 if any payment of service tax was made under the respective taxable service head before the said date, qua such contract, composition scheme was not available. Thus, for the ongoing projects as on 1-6-2007, if any payment of service tax was made under the respective taxable services, composition scheme would not be available for the same. Penalties under section 76 and 78 of Finance Act - HELD THAT:- As per the settled legal position penalty under section 76 is not tenable when penalty under section 78 is imposed. This issue no longer res integra. Thus, appellant is not liable for penalty under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat appellant was classifying the services rendered for 34 ongoing contracts under Commercial or Industrial Construction Services and Construction of Complex Services and was also paying Service Tax before 1-6-2007. Appellant reclassified the services of ongoing contracts under Work Contract Services with effect from 1-6-2007 under composition scheme by paying Service Tax at concessional rate of 2% on introduction of Works Contract Services, which was increased to 4% with effect from 01.03.2008. A show cause notice dated 22-10-2008 was issued by DGCEI, Ahmedabad demanding Service Tax of Rs. 7,07,31,967/- for the period 1-6-2007 to 31-7-2008. A corrigendum and an addendum was also issued wherein amount of Service tax payable was revised and re-classification of the service by the Appellant was challenged leading to increase of the Service tax demand to Rs. 21,79,20,740/- On similar ground as contained in the SCN dated 22.10.2008, another SCN dated 23.10.2009 was issued to the Appellant demanding Rs. 4,22,05,286.In Adjudication, vide Order-In-Original No. STC/20/Commr/Ahd/2010 dated 28.10.2010 and STC /21/Commr/Ahd/2010 dated 29.10.2010 Ld. Commissioner confirmed the demands ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who opts to pay service tax under these rules shall exercise such option in respect of a work contract prior to payment of service tax in respect of the said work contract and the option so exercised shall be applicable for the entire work contract and shall be withdrawn until the completion of the said work contract. 2.2 Appellant opted for payment under the Composition Scheme right from 01.06.2007 prior to payment of service tax in respect of the said works contract. With effect from 01.06.2007 started paying service tax under the category works contract after availing benefit of composition scheme. Clearly after the date of introduction of Work Contract Service in the Finance Act, 1994 they opted for composition scheme, thus fulfilling to condition, to the extent it can be fulfilled. Impugned orders are liable to be quashed and set aside. 2.3 He further by relying the Hon ble Supreme Court judgment in the case of Larsen Toubro 2015(8) TMI 749, submits that activity which is in nature of work contract was never taxable for the period prior to 01.06.2007. Therefore, the classification of services adopted by the Appellant for the period prior to 01.06.2007 becomes i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant from Commercial or Industrial Construction Services Construction of Complex Service into Work Contract Service w.e.f. 01.06.2007, the CBEC vide Circular No. 128/10/2010-S.T. dated 24.08.2010 acknowledged the prevalence of confusions / disputes with respect to long term work contracts which were entered into prior to 01.06.2007. It was clarified that the said services like Construction, Erection, Commissioning or installation, repair services were classifiable under respective taxable services even if they were in the nature of work contract. On the issue of admissibility of composite scheme of works contract service for the ongoing contracts as on 01.06.2007, it is clarified that the material facts would be whether such a contract satisfies Rule 3 (3) of the Work 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 01.06.2007 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t service w.e.f. 01.06.2007 Appellant switched over to payment of Service tax from Commercial or Industrial Construction Service/ Construction of Complex Service to Works Contract Service Composition Scheme w.e.f. 01.06.2007 for ongoing projects. As per the Provision of Works Contract (Composition Scheme for Payment of Service tax) Rules, 2007, Appellant was not eligible for the benefit of composite scheme for ongoing projects for which service tax paid before 01.06.2017 under Commercial or Industrial Construction Service/ Construction of Complex Service. There is no dispute on these factual issues. 4.1 We observed that that Central Board of Excise Customs vide Circular No. 128/10/2010-S.T., dated 24-8-2010, in respect of such continuous contracts, has clarified as under: Works Contract - Service tax on ongoing works contract entered into before 1-6-2007 - Classification Composition scheme clarified Circular No. 128/10/2010-S.T., dated 24-8-2010 F.No. 354/141/2010-TRU Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs, New Delhi Subject : Service tax on on-going works contracts entered into prior to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into effect from 1-6-2007, such contracts would be eligible for opting of the composition scheme. 4. The Board s previous Circular No. 98/1/2008-S.T., dated 4-1-2008 and the ratio of judgment of the High Court of Andhra Pradesh in the matter of M/s. Nagarjuna Construction Company Limited v. Government of India [2010 (19) S.T.R. 321 (A.P.) = 2010 TIOL 403 HC AP ST] are in line with the above interpretation. 5. Trade Notice/Public Notice may be issued accordingly. From the above circular, it is clear that for the ongoing contracts which were classified where service tax has been paid in the respective specified services before being classifiable under the works contract service , the benefit of composition scheme would not be applicable. In the instant case it is admitted facts that the appellant has paid service tax on ongoing projects under Commercial or Industrial Construction Services and Construction of complex service. Therefore on these 34 ongoing projects the option to pay service tax under the Works Contract (Composition Scheme for Payment of Service tax) Rule, 2007 is not available to the Appellant. 4.2 We also find that, in the case of Nagarjuna Constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules it is very clear that the assessee who wants to avail of the benefit under Rule 3 of the 2007 Rules must opt to pay service tax in respect of a works contract before payment of service tax in respect of the works contract and the option so exercised is to be applied to the entire works contract and the assessee is not permitted to change the option till the said works contract is completed. 28. In the instant case it is an admitted fact that the appellant-assessee had already paid service tax on the basis of classification of works contract which was in force prior to 1st July, 2007. In the circumstances, it cannot be said that the appellant had exercised a particular option with regard to the mode of payment of tax after 1st July, 2007 with regard to reclassified works contract. We are in agreement with the submissions made by the learned counsel appearing for the respondents that not availing of CENVAT credit is absolutely irrelevant in the instant case. 29. We do not accept the submission of the learned counsel appearing for the appellant that the Impugned Circular is discriminatory in nature. Those who had paid tax as per the provisions and classification exist ..... X X X X Extracts X X X X X X X X Extracts X X X X
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