RAJ ENGINEERS VERSUS C.C.E. & S.T.-RAJKOT

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