Service Tax Appeal No. 475 of 2012
(Arising out of OIA-443-444/2012/COMMR-A/RBT/RAJ dated 23.07.2012 passed by
Commissioner of Central Excise, Customs (Adjudication),-Rajkot)
RAJ ENGINEERS
VERSUS
C.C.E. & S.T.-RAJKOT
APPEARANCE:
Shri Karan Bhuva and Moiz Dhangot (Chartered Accountant) appeared for the Appellant
Shri P.K.Singh, Superintendent (AR) for the Respondent
CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR
HON’BLE MEMBER (TECHNICAL), MR. RAJU
Final Order No. A/ 10093 /2023
DATE OF HEARING: 21.12.2022
DATE OF DECISION: 23.01.2023
RAMESH NAIR
The brief fact of the case is that the appellant having service tax
registration, during 2005-2006 to 2008-2009 have provided composite
contract service in Reliance Township Jamnagar. The appellant have
paid service tax only on service portion deducting value of material
supplied claiming the benefit granted under Notification No. 12/03-ST
dated 20.06.2003. The department proposing denial of benefit of
Notification No. 12/03-ST dated 20.06.2003 issued a show cause notice
dated 01.09.2010 considering the gross value i.e. including cost of
material and service provider. The adjudicating authority vide order-in
original dated 08.12.2011 extended the benefit of Notification No. 12/03-
ST dated 20.06.2003 and dropped the demand of service tax to the
extent of value of material supplied. The department, being aggrieved
by the order-in-original dated 08.12.2011 filed an appeal before the
Commissioner (Appeals)/RBT/RAJ dated 23.07.2012 who set aside the
order passed by the adjudicating authority to the extent of service tax on
value of material and allowed the appeal filed by the department for
disallowing the benefit of notification No. 12/03-ST dated 20.06.2003.
Being aggrieved by the order-in-appeal, the appellant filed the present
appeal.
Shri Karan Bhuva along with Shri Moiz Dhangot, learned Chartered
Accountant appearing on behalf of the appellant reiterates the findings of
the adjudication order. He further submits that the material cost was
clearly declared in each and every invoice raised by the appellant to the
service recipient and the same was accepted by the service recipient.
Accordingly the material cost is clearly identifiable, therefore, the same is
deductible from the gross value in terms of Notification No. 12/03-ST.
He submits that the adjudicating authority after considering various
documents such as copies of invoices, audited annual accounts, copy of
VAT returns, income bills, extended the benefit of Notification No. 12/03-
ST, therefore, the finding of the Commissioner (Appeals) that no
evidence was produced with regard to fact of value of material is
incorrect and not sustainable. He alternatively submits that there is no
dispute that the appellant have provided the composite contract which
falls under the category of works contract service, which was not taxable
till 01.06.2007 and subsequently the service tax was applicable on a
concessional rate applicable to composite contract, for this reason also
the demand is not sustainable. He further without prejudice to the above
submits that it is admitted fact the appellant have provided the service
along with material, therefore, the appellant are otherwise eligble for
abatement under Notification No. 15/04-ST and 01/06-ST whereunder
the abatement of 67% of the value is available and the service tax was
payable only on 33%. However in the present case, the appellant have
paid service tax on the part of gross value which is more than 33%, for
this reason also, the demand is not sustainable. He further submits that
as regard the Revenue’s contention that the service is in the nature of
repair and maintenance service, therefore, the appellant is not eligible
for any exemption, he submits that as per the Hon’ble Supreme Court,
judgement in the case of Safety Retreading Company Pvt. Ltd. Vs
Commissioner of Central Excise, Salem Civil Appeal no.(S)641/2012 it
was ruled that even if the assessee was engaged in reparing and
maintenance service, then also the benefit of Notification No. 12/03-ST
could not be denied. He further submits that in the present case,
demand for extended period was also raised. Since the appellant have
been discharging the service tax bonafidely by claiming the exemption
Notification No. 12/03-ST and was paying the service tax, there is no
suppression of fact on their part. They were also filing their periodical
ST-3 returns, therefore, the demand for the extended period is not
sustainable on the ground of limitation. In support of his above
submissions, he placed reliance on the following judgements:
CCE vs Larsen & Toubro & Ors. In Civil Appeal No. 6770 of 2004 &
Ors. Dated 20th August 2015
Appeal No. ST/240/2012 (PC Snehal Construction Co) vide Final
Order No. 11094/2022 dated 06.09.2022 (Tri. Ahm.)
Shri
P.K. Singh, learned (Superintendent) Authorized
Representative appearing for the Revenue reiterates the findings of the
impugned order. He submits that the appellant have provided the
service under the category of maintenance and repair service, therefore,
they are not eligible for exemption Notification NO. 12/03-ST.
We have carefully considered the submissions made by both the
sides and perused the records. We find that the limited issue to be
decided in the facts of the present case is whether the appellant is
eligible for exemption Notification No. 12/03-ST which provides the
abatement of value to the extent of material cost and whether the
demand on service tax is otherwise sustainable on the submission of the
appellant that they are eligible for composite contract scheme
alternatively abatement Notification No. 15/2004-ST and 01/2006-ST.
We find that from the invoices, the appellant have declared the service
charges and cost of material separately. The adjudicating authority after
considering the invoices, books of accounts, audited annual accounts,
copy of VAT returns, income bills etc., came to the conclusion that since
the cost of material is identifiable, the same is liable to be deducted from
the gross value in terms of Notification 12/03-ST. We find that since the
appellant have declared a material cost and the same was accepted by
the service recipient, no doubt can be raised that the material cost
declared in the invoice is incorrect unless t is proved contrary by the
department. It is also not in dispute that the appellant have provided
the composite contract to the service recipient which includes service and
material. Therefore, in our considered view the appellant is entitled for
Notification No. 12/03-ST. The appellant have also argued that since
they have provided the composite contract i.e. with material and they
have discharged the VAT, their service is classifiable under works
contract service. We completely in agreement with the appellant. In
such case, firstly the service tax is not payable till 01.06.2007 when the
works contract service became taxable. Consequently, for the
subsequent period also if the service tax is calculated at the rate
applicable to the composite works contract, no demand would arise as
appellant have been paying service tax on higher value despite the
deduction on account of material cost, for this reason also demand is not
sustainable. The appellant also alternatively submitted that since they
have provided the services along with material, which is not disputed by
either side, the appellant is eligible for abatement under Notification No.
15/2004-ST and 01/2006-ST. We find that there is force in this
submission of the appellant has admittedly, the appellant have provided
the service along with material. Therefore, by identifying the cost of
material, the appellant is eligible for deduction of 67% from the gross
value of the service and they are leiable to pay service tax on 33% of the
gross value. The appellant have submitted a chart as below:
From the above, it can be seen that as against the abatement of 67%
available under Notification No. 15/04-ST and 01/06-ST, the appellant
have taken the abatement ranging from 30% to 48%. Thus, despite the
availability of abatement as per the above notification, the appellant
have paid the service tax on much higher value, for this reason also the
demand is absolutely unsustainable. On going through the judgement,
we find that judgements cited by the appellant are supportive to the case
of appellant.
As per our above discussion and finding, the impugned order is not
sustainable, hence the order-in-original is upheld and order-in-appeal is
set aside. Appeal is allowed with consequential relief.
(Pronounced in the open court on 23.01.2023)
(RAMESH NAIR)
MEMBER (JUDICIAL)
(RAJU)
MEMBER (TECHNICAL
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