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TMI Blog2024 (4) TMI 681X X X X Extracts X X X X X X X X Extracts X X X X ..... ial construction service' even before registering with the department on 11.6.2007, but it had not paid any service tax on such services; (b) had not paid service tax on some projects/contracts on the ground that they were charitable/educational hospitals or projects and hence did not fall under the category of 'commercial and industrial construction service'; (c) had not paid service tax on certain residential construction on the ground that they were residential units and did not fall under the category of 'residential complexes'; (d) had collected some amounts as 'service tax' in some of the running bills on these projects, but did not deposit these amounts in the exchequer; (e) had not included the value of materials supplied free of cost by its clients in the value of taxable services; and (f) had not paid any service tax at all in respect of the services rendered by it from April 2009 to June 2010. 3. After recording statements and investigating the matter, a Show Cause Notice SCN dated 20.10.2010 was issued which was decided by the impugned order dated 28.2.2017 by the Commissioner complying with a direction from the Chief Commissioner dated 22.11.2016 to dispose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions on both sides and perused the records. 7. As far as the demand for the services provided prior to 1.6.2007 are concerned, the demand is under the head 'commercial and industrial construction service'. During this period, the appellant was not registered with the service tax. From 1.6.2007, the appellant is registered under the head 'Works Contract Service' and paid service tax on the service. There is no dispute that the nature of the service was the same both before and after 01.06.2007. 8. 'Works Contract Service' is a contract which involves rendering of service along with transfer or deemed transfer of property in goods. For instance, if a builder constructs a building under a contract including the cost of materials, not only does he render the service but he also transfers the property in the material used such as bricks, steel, cement, etc. while rendering the service. Such services are distinct from contracts for sale of goods or contracts for rendering services and are known to commerce as a separate species of contracts. Such contracts became chargeable to service tax as 'works contracts service' w.e.f 1.6.2007 and there was no charge of service tax on such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch service rendered by him. This would unmistakably show that what is referred to in the charging provision is the taxation of service contracts simpliciter and not composite works contracts, such as are contained on the facts of the present cases. It will also be noticed that no attempt to remove the non-service elements from the composite works contracts has been made by any of the aforesaid Sections by deducting from the gross value of the works contract the value of property in goods transferred in the execution of a works contract. ...... 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 levied at only 2 per cent of the total value of the works contract." 28. Pursuant to the aforesaid speech, not only was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turns in due time........." 11. The appellant's reply on this question are as follows: " That the above referred case laws itself proves that lot of confusions existed during the period about taxability, valuation and thus the allegation of suppression, evasion is not correct. That the noticee were always in a bonafide belief that service tax is not payable. They never intended to suppress the fact. Thus the allegation of suppression is not correct and justifiable....." 12. The findings in the impugned order on the question of limitation is as follows: " 58. In this case, the assessee had wilfully and deliberately suppressed the facts with intent to evade service tax........ in as much as they failed to register themselves with the department before 11.6.2007 and even after taking registration on 11.6.2007, they neither disclosed the collection of gross amounts collected for providing services to the department nor filed ST-3 returns in due time. It was not a case of ignorance. In some case, they even collected service tax without depositing in Government account. Thus, it is clear that the assessee wilfully suppressed the material facts to the department with an intention to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be sustained. 15. On merits of the demand, the appellant's submissions are as follows: a) The services rendered to (i) Mahatma Gandhi Hospital; (ii), Acharya Tulsi Shanti Pratisthan; and (iii) Shri Amar Jain Medical Relief society were not taxable because these organisations were exempted under section 12AA of the income tax Act, 1961. b) Where the services were rendered in relation to construction of a single house, they are not covered under 'construction of complex services'. c) It was eligible to Works Contract (Composition) scheme which was not given to it on the sole ground that it had not submitted a letter opting for it; d) The value of free supply of goods by the service recipient cannot be included in the assessable value as has been done in the impugned order; 16. We have considered these submissions. The appellant cannot claim exemption from service tax on the ground that its client was exempted under some provision of income tax. If it wants to claim exemption from service tax, it is its responsibility to show how it was covered by an exemption notification or exemption clause under the provisions of the service tax. Similarly, if it wants to claim exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch of this Tribunal in Bhayana Builders (P) Ltd. vs Commissioner 2013 (32) S.T.R. 49 (Tri. - LB) that the value of supplies made free of cost by the service recipient cannot be included in the taxable value for calculating service tax. This decision was upheld by the Supreme Court 2018 (10) G.S.T.L. 118 (S.C.). Therefore, the demand on this account needs to be set aside. 20. In view of the above, the appeal is partially allowed and the impugned order is modified as below: a) the demand under the head 'commercial and industrial construction service' for the period before 1.6.2007 is set aside; b) other demands beyond the normal period of limitation are set aside; c) for the demands within the normal period, the appellant is entitled to the Works Contract (composition) scheme and the value of any free materials supplied by the client to the appellant cannot be included in computing the service tax payable; d) the matter is remanded to the original authority for the limited purpose of calculation of service tax as above; e) if any service tax becomes due after calculating as above, interest on such amount shall also be paid; f) all penalties are set aside. 21. The appel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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