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TMI Blog2024 (9) TMI 1597X X X X Extracts X X X X X X X X Extracts X X X X ..... orities. The audit team observed that the appellant has not paid service tax on various output services and availed irregular Cenvat credit on services. On the basis of those observations by Audit, a show cause notice dated 22 July 2013 was issued to the appellant containing 8 different allegations. The Notice was adjudicated by the Ld. Commissioner vide the impugned Order-in-Original No. 45/Comm/ST/KOL/2014-15 dated 25.07.2014, wherein he has confirmed the following demands and dropped the remaining demands raised in the Notice : Sl. No. Issue Involved Period Duty Demanded 1 Alleged Irregular Availment of Composition scheme with respect to TC No. 70 and TC No. 103 October 2007 to March 2012 68,02,449 2 Alleged short payment of tax due to discharge of tax at the rate prevailing on the date of provision of service and raising of invoice as against the rate prevailing on the date of receipt of the taxable value. November 2008 56,172 3 Alleged short payment of tax by following realization basis as against the accrual basis prescribed under the POT Rules by comparing the "gross amount billed and "gross amount received" as reflected in the ST 3 returns of the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice tax confirmed in this regard is not sustainable. 4. Regarding the demand of service tax confirmed in the impugned order on the allegation that the Appellant should have discharged tax at the rate prevailing on the date of receipt (4.12% in November 2008) of the taxable value as opposed to the rate prevailing on the date of provision of service and raising of invoice thereof (i.e. 2.06% prior to 1 March 2008), the appellant submits that they have rendered the output services prior to 1 March 2008 when the rate of works contract composition scheme was 2.06%. The appellant submits that in so far as service tax is concerned, the taxable event is the rendition of service. Hence, rate of tax applicable is the one which was prevalent when the services were rendered and not when the payments were received. Reliance in this regard is placed on the judgement of the Hon'ble High Court, Delhi in the case of Vistar Construction (P) Ltd. Vs. Union of India [2013 (31) S.T.R. 129. Thus, the appellant submits that the demand of service tax confirmed on this count is not sustainable. 5. Regarding the demand confirmed in the impugned order based on the difference between 'gross amount billed' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h respect to input services user for dutiable and exempt output services, the appellant submits that they have maintained Contractwise/ project-wise separate records in its accounting software (SAP), whereby each contract/project was shown as a separate profit centre. Therefore, separate records with respect to exempt and taxable outward supply were being maintained by the Appellant in compliance with Rule 6 of the Cenvat Credit Rules. Reliance in this regard is being placed on the judgement of the Tribunal in the case of Essar Projects India Limited Vs. CCE [2011 (23) STR 140] whereby it was held that the provision of Rule 6(3) does not apply if the Cenvat records are maintained project-wise/contract-wise. The said judgement has been accepted by the department. Accordingly, the appellant submits that the demand of reversal of Cenvat credit confirmed in the impugned order on this count is not sustainable. 8. Regarding Irregular availment of pro-rata Cenvat credit attributable to bad debts written off, the appellant submits that the impugned notice is vague and against the principles of natural justice as it does not even put the Appellant to Notice as to the exact charge/violation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited Vs. Assistant Commissioner, Service Tax Commissionerate, Kolkata - 2022 (12) TMI 523. The relevant part of the said decision is reproduced below : "14. In GET and N India Limited Versus Commissioner of Central Excise and Service Tax, Large Tax Payer Unit, Chennai in C.M.A. No. 2032 of 2019 dated 16.12.2019 the High Court of Madras, identical issue was considered and the Division Bench approved the view taken by the tribunal in the case of Vaishno Associates Versus CCE & ST, Jaipur (2018) VIL 217 wherein the court considered the composition scheme and pointed out that no format has been prescribed for making/exercising an option nor has it been specified as to whom the option must be addressed, the fact of the paying service at composition rate in the return filed by the service provider is enough indication to show that they have opted for payment under the works contract composition scheme." 14.1. By relying on the decision cited above, we hold that the appellant has rightly paid service tax under the Works Contract Composition Scheme and hence the demand confirmed under this category is not sustainable. Accordingly, we set aside the same. 15. Regarding the demand of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto effect much later in 2011. Recently, we had to consider a similar issue in Commissioner of Service Tax v. Consulting Engineering Services (1) Pvt. Ltd. in ST. Appl. 76/2012, decided on 14-1-2013 [2013(30) S.TR. 586 (Del.)] wherein we held that in the absence of any rules, we would have to examine as to what is the taxable event. In that context we had held that the taxable event as per the Finance Act, 1994 was the providing or rendition of the taxable services. This is exactly what the Supreme Court had held in Association of Leasing & Financial Service Companies (supra). 10. Therefore, the rate of tax applicable on the date on which the services were rendered would be the one that would be relevant and not the rate of tax on the date on which payments were received. The instruction dated 28-4-2006 which is contrary to the law declared by the Supreme Court is clearly invalid. In Commissioner of Central Excise, Bolpur v. Ratan Meltins & Wire Industries-2008 (12) S.T.R. 416. (S.C.) = 2008 (231) E.LT. 22( S.C.), a constitution bench of the Supreme Court observed as under: "Circulars and instructions issued by the Board are no doubt binding in law on the authorities under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there is no suppression of fact established in this case. Accordingly, we hold that no penalty imposable on the appellant on this demand confirmed. 17. Regarding the alleged short-payment of service tax of Rs.3,53,30,714/- based on the comparison of select GL Codes appearing in the Trial Balance of the Appellant vis-à-vis the income reflected in the ST 3 returns, we observe that the appellant submitted a detailed reconciliation report duly certified by a Chartered Accountant, along with the reply to the show cause notice. As per this report, we observe that there was no differences in the income reflected in the trial balance and the income reflected in the ST 3 returns. However, we observe that the adjudicating authority has not given any finding on this report in the impugned order. 17.1. The appellant submitted that there cannot be a straitjacket comparison between the income reported in the Trial Balance vis-à-vis the income reflected in the ST 3 returns in case of construction companies executing EPC contracts. We find that this view has been taken by the Hon'ble Madras High Court in the case of Firm Foundations & Housing Pvt. Ltd. Vs. Pr. Commr. Of ST, Chenn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the petitioner confirms that it has, in fact, received lump sum advances corresponding to several initial landmarks in the contract, even prior to the achievement of such landmarks. As per the provisions of Rule 3(b). the entire sum received thus becomes taxable upon receipt and according to Mr. Prabhakar, has been offered to tax. 25. Instead of such determination by application of the provisions of Rule 3, the respondent relies upon the P and L accounts to conclude that the amounts reflected therein have not been offered for service tax. The reporting of income in the P and L being irrelevant for the purposes of determination of service tax payable, the basis of the impugned assessment is erroneous. 26. It is a well settled position that when a statutory provision or rule addresses a specific scenario, such rule/provision is liable to be interpreted on its own strength and context and one need look no further to alternate sources to seek clarity in regard to the issue that has been addressed by the aforesaid rule/provision." 17.2. Thus, by relying on the reconciliation report submitted by the appellant and the decision of the Hon'ble Madras High Court cited above, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n amounts for consideration of services, they have not received. Prior to 01.04.2011, the appellant was required to pay service tax on receipt of consideration for the service provided, which means that if the appellant is failed to received consideration qua service provided, the appellant is not required to pay service tax, which does not mean that the appellant has provided exempted/non-taxable service. Rule 3 of the Centvat Credit Rules, 2004 deals with the situation for entitlement of the Cenvat credit, which prescribes that a provider of the output service shall be allowed to take Cenvat credit of any input service received by the provider of output service on or after 10th day of September, 2004. Admittedly, the services on which the appellant has taken Cenvat credit are input services' in terms of Rule 2(1) of the Cenvat Credit Rules, 2004 and is a provider of output service. Therefore, in terms of Rule 3 of the Cenvat Credit Rules, 2004, we hold that the appellant is entitled to avail Cenvat credit on input services in question. Further, we hold that there is no such provision in the Cenvat Credit Rules, 2004 or in the Finance Act, 1994 for reversal of Cenvat credit fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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