TMI Blog2022 (7) TMI 1182X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant is that the service provider has an option to pay service tax either under CICS or under WCS. This submission is completely misplaced and is contrary to any canons of taxation. When any tax is levied, the taxable event is defined in the Act. In case of Customs, the taxable event is the import or export, in case of excise, it is the manufacture, in case of VAT, it is the sale or deemed sale of goods and in case of income tax, it is the earning of income. If no taxable event takes place, no tax can be levied. The taxable event under Finance Act, 1994 in case of services simpliciter is rendering of a taxable service and in the case of works contract it is rendering of a service along with supply or deemed supply of goods. To determine tax liability, it must first be established as to whether the service rendered falls in one of the taxable services. This classification is not a matter of choice or discretion either of the officers or of the assessee. A service cannot, at the same time be classified under more than one head - For instance a salary can only be classified as an income from salary and not as income from profession or business to claim deductions. Therefore, the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 2,54,64,515/- (Rupees Two Crore Fifty Four Lakh Sixty Four Thousand Five Hundred Fifteen only) (as mentioned at (i) above) at applicable rate form the assessee under provisions of Section 75 of the Finance Act, 1994. (iii) I impose a penalty of Rs. 10,000/- (Rupees Ten Thousand only) on the assessee for not filing the prescribed Service Tax Returns within the prescribed time limit, in a prescribed manner, under the provisions of Section 77 of the Finance Act, 1994 and (iv) I impose a penalty of Rs. Rs. 2,54,64,515/- including Edu. Cess SHE Cess (Rupees Two Crore Fifty Four Lakh Sixty Four Thousand Five Hundred Fifteen only) on the assessee under Section 78 of the Finance Act, 1994. However, the assessee have an option to deposit the 25% amount of the said penalty, if the Service Tax and the interest payable alongwith penalty thereon are paid by them within 30 days from the communication of this order in terms of 1st proviso to Section 78 of the Finance Act, 1994 . 2. The facts of the case, in brief are that the appellant is engaged in construction and is registered with the Department under the categories of Commercial or Industrial Construction Services C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is beneficial to it. (d) The demand of service tax has been wrongly computed by not considering clause (ii) of Rule 2A of Service Tax Valuation rules by the Commissioner. (e) The demand is time barred as it has been filing the returns periodically before the Revenue. The penalties under Section 77 and 78 are not imposable. 6. Learned Counsel prayed that the appeal may be allowed and the impugned order may be set aside with consequential relief. 7. Learned Authorized Representative of the Revenue supports the impugned order and submits that it calls for no interference. 8. We have considered the submissions on both sides and perused the records. 9. The undisputed facts of the case are that the appellant had rendered services which involved utilization of materials and had charged a gross amount from its clients without vivisecting the cost of goods used and the charges for its services. Contracts which involve both rendering of services and supply or deemed supply of goods are known as works contracts . It has been held by Supreme Court in the case of Commissioner of Central Excise Customs, Kerala versus Larsen Toubro Ltd. 2015 (39) S.T.R. 913 (S.C.) , t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of the overwhelming component test, because there is a stipulation in the contract that the customer is obliged to undertake the work of civil construction and the bulk of the material used in construction belongs to the manufacturer, is not correct, as the subsequent discussion 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hit by Section 23 of the Indian Contract Act, and hit by Mcdowell s case. 43. We need only state that in view of our finding that the said Finance Act lays down no charge or machinery to levy and assess service tax on indivisible composite works contracts, such argument must fail. This is also for the simple reason that there is no subterfuge in entering into composite works contracts containing elements both of transfer of property in goods as well as labour and services. 44. We have been informed by counsel for the revenue that several exemption notifications have been granted qua service tax levied by the 1994 Finance Act. We may only state that whichever judgments which are in appeal before us and have referred to and dealt with such notifications will have to be disregarded. Since the levy itself of service tax has been found to be non-existent, no question of any exemption would arise. With these observations, these appeals are disposed of. 45. We, therefore, allow all the appeals of the assessees before us and dismiss all the appeals of the revenue. (emphasis supplied) 10. Considering that the appellant in this case has used material for rendering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not as income from profession or business to claim deductions. Therefore, the submission of the learned Counsel for the appellant that it is open for the appellant to classify its services under any head it pleases is not correct. We have already held above that given the factual matrix, the services rendered by the appellant were correctly classifiable under WCS. 12. Learned Counsel for the appellant has also submitted that even if the demand is made classifying its services under WCS, the calculation by the learned Commissioner is not correct. Further, he submitted that the Works Contract (Composition Scheme for the payment of Service Tax) /Rules, 2007 is also available to it. As has been observed in the audit report and in the impugned order, the Service Tax Composition Scheme, requires the assessee to make an option which it had not done. 13. It has been submitted by the learned Counsel for the appellant that three methods for calculation of service tax are :- (a) Under commercial or industrial construction service claiming the benefit of Notification No. 1/2006-ST dated 01.03.2006 on 33% of the gross amount charged ; (b) Under Rule 2A of Service Tax (Determina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not disclosed the material facts to the department to the extent of providing the taxable service under the category of works Contract service as defined under Section 65 (105) (zzzza) of the Finance Act, 1994 during the period from October, 2010 to June, 2012 thus they have willfully not deposited the applicable service tax and deliberately knowingly suppressed the facts by not filing the prescribed Service Tax Returns within the prescribed time limit, in a prescribed manner. Thus, it appears that they did so with intent to evade payment of Service Tax. Therefore, extended period of limitation appears to be invokable in this case under the proviso to Sub-section (1) of Section 73 of the Finance Act, 1994, as amended. The assessee also appears liable to pay interest at applicable rates under Section 75 of the Act ibid . 17. We are unable to find any proof of intent to evade either from the show cause notice or from the impugned order. Mere omission or merely classifying its services under an incorrect head does not amount to fraud or collusion or willful misstatement or suppression of facts. The intention has to be proved to invoke extended period of limitation. Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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