The Circular No. 98/1/2008-ST dated 01-01-2008 issued by the 1st respondent is in challenge. On a true and fair construction of Rule 3(3) of the 2007 Rules, it is clear that where in respect of a works contract service tax has been paid, no option to pay service tax under the composition scheme could be exercised. There is no ambiguity in this provision. The entitlement to avail the benefits of the composition scheme is only after an option is exercised under Rule 3(3) of the 2007 Rules and this provision specifically enjoins a disqualification for exercise of such option where service tax had been paid in respect of a works contract. To put it succinctly, where service tax has been paid in respect of a works contract, the eligibility to exercise an option to avail the benefits of the composition scheme under the 2007 Rules is excluded.
The fact that the nature of the works executed by the petitioner which hitherto fell within the ambit of the taxable services enumerated in Clauses (zzd), (zzq) and (zzzh), now fall within services classified as a works contract in Clause (zzzza), does not in our considered view have any bearing on the entitlement of the petitioner to the benefits of the composition scheme under the 2007 Rules and in the facts and circumstances of this case. The benefit of the composition scheme under the 2007 Rules is available [subject to the exercise of option and the conditions of eligibility for exercise of such option as spelt out in Rule 3(3)] only in relation to “works contract service”, as defined in Rule 2(c) as meaning service provided in relation to execution of the works contract referred to in sub-clause (zzzza) of Clause 105 of Section 65 of the Act.
IN THE HIGH COURT OF ANDHRA PRADESH
Writ Petition No. 6558 of 2008
M/s Nagarjuna Construction Company Ltd.
Vs
Government of India
Ministry of Finance, Department of Revenue
North Block, New Delhi
Coram: Godaraghuram and Noushad Ali, JJ
Date of judgement : June 7, 2010
Appellant Rep by: Mr S R Ashok, Sr. Counsel Mr. S Chakrapani, Counsel
Respondent Rep by: Mr. A Rajasekhara Reddy, Standing Counsel
J U D G E M E N T
Per: Sri Justice Noushad Ali:
1. The Circular No. 98/1/2008-ST dated 01-01-2008 issued by the 1st respondent is in challenge.
2. The petitioner is a dealer on the rolls of the Commercial Tax Officer, Srinagar Colony Circle, Hyderabad as well as the service provider, an assessee on the file of the Commissioner of Customs and Central Excise, Hyderabad- II Commissionaire. It carries on the business of execution of civil works including construction of buildings (residential and commercial), roads, bridges, dams, electrical installations etc., throughout the country. The petitioner has been undertaking various civil works „as a works contract’. It asserts that the works pursued by it fall within the purview of „works contract’ under the respective State enactments dealing with Sales Tax or Value Added Tax, as the case may be and further claims to be paying the taxes under the State Legislation on the material component, in accordance with the State Taxes Legislation including in Andhra Pradesh.
3. The impugned circular issued by the Government of India, Ministry of Finance (the 1st respondent), to the extent of the clarification item, relevant and material for the purposes of the case (Reference Code No. 097.03, dated 04.01.2008), reads:
“To
Chief Commissioners of Central Excise (All) Chief Commissioners of Central Excise & Customs (All) Directors General (All) Commissioners of Service Tax (All) Commissioners of Central Excise (All) Commissioners of Central Excise & Customs (All)
Sub: Amendment to Circular No. 96/7/2007-ST dated the 23 rd August, 2007 – Clarification in respect of renting of immovable property service and works contract service – Regarding.
In the circular No. 96/7/2007-ST dated the 23 rd August, 2007:
(i) after Reference Code 086.05/23.08.07, the following Reference Code and corresponding issue and clarification shall be inserted, namely:-
