Relief to Johnson Lifts Pvt Ltd: Order for Payment of Service Tax not Justified on Payment of VAT, rules CESTAT [Read Order]

The Chennai bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that the Commissioner of G.S.T. and Central Excise (the respondent) was not justified in issuing an order for levying Service Tax as Johnson Lifts Pvt Ltd (the appellants) had paid value added tax (VAT).

In a contract of Johnson Lift Pvt Ltd the Commissioner of Central Excise noticed that they had only paid 15% Service Tax on the total value of work as per the contract and upon further inquiry, it was revealed that they are paying the balance 85% as VAT. It was revealed that the payment of VAT for the works contract was made as per the prevailing / respective State VAT law. The revenue doubted that the payment of Service Tax by the appellant was not as per Rule 2A of the Service Tax (Determination of Value) Rules, 2006.

Subsequently, a show-cause notice was issued demanding the recovery of Service Tax for the financial years of 2012-2014 along with interest under section 75 and penalty under sections 76,77 and 78 of the Finance Act, 1994. The appeal filed by the company was rejected by the adjudicating authority even though they had filed detailed replies to the revenue, rebutted the allegations, and justified the same.

S. Durairaj appeared on behalf of the company and contented that the revenue did not deny the payment of VAT as per the VAT Act at the prevailing rates and the issue of demanding Service Tax on the ground that the valuation was not according to Rule 2A of the Service Tax Valuation Rules was already settled by the Supreme Court In the case of M/s. Safety Retreading Co. (P) Ltd. v. Commissioner of C.Ex., Salem.

The Counselalso referred to a case decided by this very bench in which they had claimed precedence to the above-mentioned case, and therefore the demand for Service Tax was not proper and is required to be set aside

M. Ambe appeared on behalf of the revenue and supported the findings of the lower authority.

The two-member bench consisting of P. Dinesha (Judicial Member) and M. Ajit Kumar (Technical Member) followed the decision by the Supreme Court and held that the impugned order could not be sustained and allowed the appeal with consequential benefits if any was available as per law.

To Read the full text of the Order CLICK HERE

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