CESTAT remands matter back to Original Adjudicating Authority to ascertain if VAT or Sales Tax has been paid for all Contracts under Category of Works Contract [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT),  Ahmedabad Bench has remands matter back to the Original Adjudicating Authority to ascertain if VAT or Sales tax has been paid for all contracts under category of works contract.

The appellant, Western Corrosion Controller were engaged in providing various services to their clients and were discharging service tax under the head of Commercial and Industrial Construction Services availing benefit of Notification which provided abatement of 33% on the gross amount charged for the purpose of discharge the service tax. However, the said exemption was not available to the activity which qualified as finishing and completion work.

The Show Cause Notice sought to deny the benefit of service tax exemption Notification No 01/2006 on the ground that the services provided by the appellant qualified as finishing and completion work.

The appellant pointed out that the activities undertaken by them were inclusive of supply of material and therefore qualified as Works Contract. He pointed out that for the period prior to 01.06.2007 no service tax was leviable on works contract in terms of decision of the Apex Court in case of Larsen & Toubro Ltd- 2015 (39) STR 913 (SC).

He pointed out that their service was covered under the category of Works Contract Service and they have been discharging the tax under VAT/ Sales Tax under the category of Works Contract. In support of the said argument the appellant produced the registration certificate which shows that the appellant was registered under the category of Works Contract with Sales Tax Authorities in Gujarat.

The appellant produced various challans of payment of VAT/ Sales tax however, from the said challans it was not clear if the tax has been paid under the category of works contract or otherwise. Learned Counsel pointed out that the CBEC Circular No 334/1/2008-TRU has clarified that the fact that the VAT has been paid under the category of the works Contract is evidence in support of activity being works contract.

The coram of Judicial Member, Ashok Jindal and Technical Member Raju has noted that in the instant case while the appellant has submitted the challans under which VAT has been paid but it cannot be ascertained from the said challans if the VAT has been paid under category of “Works Contract”. While the registration document shows the appellant was registered under a works contract with Sale tax authorities. The counsel could not establish from the said records that the sales tax or VAT was paid under the head of works contract service though prima facie his claim appears to be correct.

“The matter is remanded to the Original Adjudicating Authority to ascertain if the VAT/Sales tax has been paid for all the contracts under the category of works contract. If the appellant has paid VAT/Sales Tax under the head of Works contract then the service would fall under the category of Works Contract Service. No demand under the category of Commercial & Industrial Construction Service can be confirmed. Moreover, in that case the demand of duty for the period prior to 01.06.2007 too cannot be confirmed as at material time the works contract service was not taxable. In view of the decision of the Hon’ble Apex Court in the case of Larsen and Toubro Ltd, “ the CESTAT said.

To Read the full text of the Order CLICK HERE

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