The Bangalore bench of Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has allowed to Pay Service Tax under Composition scheme of Works Contract (Composition Scheme for Payment of Service Tax) Rules for Construction of Residential Complex.
The appellant, M/s MFAR Construction Private Limited is engaged in construction of complexes. The appellants have been paying service tax under Construction of Complex Services before 01.06.2007. On introduction of service tax on “Works Contract”, the appellant sought classification, of the composite contract of “Construction of Residential Complex” under Works Contract, and opted for composition scheme under Rule 3(3) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 and started paying duty as applicable.
During the conduct of audit, Revenue observed a service provider who paid service tax prior to 01.06.2007 for the taxable services like Erection, Commissioning and Installation Service, Commercial or Industrial Construction Service or Construction of Complex Service is not entitled to change the classification of the Single Composite Service for the purposes of payment of service tax on or after 01.06.2007 and therefore, the appellant is not entitled to avail the Composition Scheme.
The appellant submitted that as per L&T Judgment Composite Works Contract were liable to service tax from 01.06.2007; the appellants have correctly classified the service and exercise the option before payment of service tax; therefore, the demand is not sustainable.
The appellant further submitted that advances received before 01.06.2007 for Works Contract is not liable to service tax; advances received after 01.06.2007 are liable to pay service tax under Works Contract and the appellants have paid tax of Rs.1,22,79,233/- out of Rs.1,42,78,233/- as recorded in the show cause notice; balance amount of Rs.19,99,033/- is confirmed by the impugned order; this balance is on account of denial of the Composition Scheme is not maintainable.
The Tribunal observed that it would be miscarriage of justice if the appellants are denied the compounded scheme of payment of duty under Works Contract after 01.06.2007 which could have been easily exercised by those who were not paying duty before 01.06.2007. The appellants cannot be put to jeopardy for the reason that they have been paying service tax before 01.06.2007 though they were not legally required to pay in view of the judgment in the case of L&T.
The Coram of Sri P.Anjani Kumar, Technical Member and Sri P Dinesha, Judicial Member has held that “the impugned order is set aside and the appeal is allowed by way of remand to the lower authority with the following directions:
(i) The appellants shall be allowed the option to pay service tax under Composition Scheme at the rates as applicable from time to time.
(ii) Demand is limited to the normal period.
(iii) The service tax paid by the appellants shall be adjusted towards the service tax payable by them under the Composition Scheme and the appellants shall pay the difference in service tax, if any”.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.
