Case Law Details
Kumar Builders Vs Commissioner of Service Tax (CESTAT Chandigarh)
CESTAT Chandigarh held that re-classification from ‘Commercial or Industrial Construction Services’ to ‘works contract service’ justified as contract and VAT registration proves that contract is work contract service.
Facts- The appellants were providing Commercial or Industrial Construction Services and have been registered for the same; the appellants have paid service tax for the period April, 2007 to September, 2007 under the said Service and from June, 2007 onwards have discharged service tax under Works Contract Composition scheme.
The Department was of the opinion that the appellants have re-classified the services rendered by them from ‘Commercial or Industrial Construction Services’ to ‘works contract service’ even when there was no dispute about the classification; in view of the CBEC Circular No. 98/2007-ST dated 04.01.2008, it was not open for the appellants to re-classify or existing service after 01.06.2007.
A show cause notice was issued and was confirmed by Order-in-Original; service tax of Rs. 19,17,496/- was confirmed along with interest and penalties were imposed. Commissioner (Appeals) upheld the Order-in-Original vide impugned order.
Conclusion- We find that the contract and the VAT registration available on record provide the necessary evidence to confirm that the contract is a works contract.
We find that learned Authorized Representative submits that in reply to show cause notice, the appellants accepted their mistake in reclassifying of the service after 01.06.2007; however, we find that despite the fact that the appellants have accepted in the written reply, this being a question of law can be raised at any point of time, and that Substantive benefit given by legislature cannot be nullified by mere averments of the appellant.
FULL TEXT OF THE CESTAT CHANDIGARH ORDER
The appellants were providing Commercial or Industrial Construction Services and have been registered for the same; the appellants have paid service tax for the period April, 2007 to September, 2007 under the said Service and from June, 2007 onwards have discharged service tax under Works Contract Composition scheme. The Department was of the opinion that the appellants have re-classified the services rendered by them from ‘Commercial or Industrial Construction Services’ to ‘works contract service’ even when there was no dispute about the classification; in view of the CBEC Circular No. 98/2007-ST dated 04.01.2008, it was not open for the appellants to re-classify or existing service after 01.06.2007. A show cause notice dated 21.10.2008 was issued and was confirmed by Order-in-Original dated 17.03.2009; service tax of Rs. 19,17,496/- was confirmed along with interest and penalties were imposed. On an appeal filed by the appellant, Commissioner (Appeals) upheld the Order-in-Original vide impugned order dated 30.06.2010.
2. Shri Surjeet Bhadu, learned counsel for the appellants submits that the service rendered by the appellants involves material and service and therefore, is correctly classified under Works Contract Service from 01.06.2007; in view of the judgment of Hon’ble Apex Court in the case of Commissioner of C.Ex. & Cust. Kerala Vs. Larsen & Toubro Ltd.-2015 (39) S.T.R. (S.C.) which was affirmed by the Hon’ble Apex Court in the case of M/s Total Environment Building Systems Pvt. Ltd. Vs. Deputy Commissioner of Commercial Taxes-2022 (63) G.S.T.L. 257 (S.C.), no service tax is payable on works contract service prior to 01.06.2007 and after 01.06.2007, the service is correctly classified under Works Contract Service and the appellants have rightly availed the Composition Scheme. He further submits that CBEC circular, clarifying that a service in existence before 01.06.2007 cannot be changed, is not binding on the Tribunal as held by the Hon’ble Supreme Court in the case of Commissioner of C.EX. Bolpur Vs. Ratan Melting & Wire Industries –2008 (231) E.L.T. 22 (S.C.) and as per Hon’ble Bombay High Court in the case of Century Rayon Vs. Union of India – 2002 (142) E.L.T. 319 (Bom.).
3. Shri Amandeep Kumar, Learned Authorized Representative for the Department submits that the appellants have made contradictory submissions; on the one hand they accepted vide reply to SCN that they did a mistake in re-classifying the service from 01.06.2007 and on the other hand they claim that L&T judgement (Supra)is applicable to them and they also submit that they may be given benefit of Notification No. 1/06-ST dated 01.03.2006 for abatement of 67% from the value. He submits that the appellant’s case is not covered by the judgment in the case of Larsen & Toubro Ltd (supra); the department has correctly demanded duty under Commercial and Industrial Construction Service. He submits that as it is brought out clearly in the show cause notice, the appellants did not submit the details of the contract and did not specify whether or not any material or input service was supplied by the recipient and if so the value thereof; the Commissioner (Appeals) has also categorically observed that the appellants have not given any corroborative evidence to prove that they provided services only on composite contract; they claimed the same to be an optional scheme; though the appellants informed vide letter dated 01.06.2007 that they opted to shift to new Scheme, no corroborative evidence was produced and hence the claim has no relevance. He submits that the contract provided by the appellants is not dated. Learned Authorized Representative rebutting the appellants submits that the Hon’ble High Court of Andhra Pradesh in the case of Nagarjuna Constn. Co. Ltd. Vs. Government of India – 2010 (19) S.T.R. 321 (A.P.) upheld the validity of the circular.
4. Heard both the sides and perused the records of the case.
5. We have gone through the records of the case and submissions by the rival parties. Brief issue to be decided in this case is as to whether the appellants are rendering works contract service classifiable under section 65 (105) (zzzza) of Finance Act, 1994 and as to whether they are entitled to avail the composition scheme thereunder. We find that the issue whether or not a certain contract is a non vivisectible composite contract or a service contract simplicitor can best be answered by the contract itself. Ongoing through the contract, we find that there are clauses as shown below.
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3) Your quoted rates are inclusive of all taxes (I.T., VAT, Service Tax, workers welfare cess etc) and other taxes as prevailing on date including octroi, royalty etc. Nothing extra shall be payable on any accord.
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8) You shall be paid secured advance against Bricks brought at site @ 70% of basic cost of material (Basic cost of bricks shall be Rs. 2400 per 1000 no’s).
A plain reading of the contract brings out the fact that a certain amount of material is involved and that the appellant was required to pay VAT etc. on the same and that an advance at the rate of Rs. 2400/per 1000 bricks would be paid to the appellant. It is clear that it talks of the involvement of material and it does not provide for the bifurcation of the material and service portion. Therefore, it has to be concluded that the contract is a composite one and not vivisectible and therefore, qualifies to be works contract. The department’s objection that the contract is not dated will not help the cause of revenue. We find that department never raised this point in either Order-in-Original or Order-in-Appeal. The only allegation was that the appellants did not provide corroborative evidence. The did not dispute the contract itself. We find that the contract and the VAT registration available on record provide the necessary evidence to confirm that the contract is a works contract. In view of the Hon’ble Apex Court judgment in the case of Larsen & Toubro Ltd (Supra) reiterated in M/s Total Environment Building Systems Pvt. Ltd (Supra), works contract are chargeable only from 01.06.2007. The appellants having opted to pay duty under the new scheme vide their letter dated 04.06.2007 have made themselves eligible for the composition scheme under works contract service.
6. We find that learned Authorized Representative submits that in reply to show cause notice, the appellants accepted their mistake in reclassifying of the service after 01.06.2007; however, we find that despite the fact that the appellants have accepted in the written reply, this being a question of law can be raised at any point of time, and that Substantive benefit given by legislature cannot be nullified by mere averments of the appellant.
7. In the light of the analyses and discussion as above, the appeal no. ST/1453/2010-DB is allowed.
(Order pronounced in the court on 12.05.2023)
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