CRYSTAL METALS P LTD VERSUS C.S.T. Service Tax-Ahmedabad

Customs, Excise & Service Tax Appellate Tribunal West Zonal Bench At Ahmedabad

 

REGIONAL BENCH- COURT NO. 3

Service Tax Appeal No. 10016 of 2013-DB

(Arising out of OIA-235/2012-STC-/AK/COMMR-A-/AHD Dated- 28.09.2012 passed by Commissioner of Central Excise and Service Tax-AHMEDABAD)

CRYSTAL METALS P LTD

VERSUS

C.S.T. Service Tax-Ahmedabad

AND

Service Tax Appeal No. 10112 of 2013-DB

(Arising out of OIA-235/2012-STC-/AK/COMMR-A-/AHD Dated- 28.09.2012 passed by Commissioner of Central Excise and Service Tax-AHMEDABAD)

C.S.T. Service Tax-Ahmedabad 

VERSUS

CRYSTAL METALS P LTD 

APPEARANCE:

Shri. Rahul Gajera, Advocate for the Appellant

Shri. Tara Prakash, Deputy Commissioner (AR) for the Respondent

 

CORAM: HON’BLE MR. RAMESH NAIR, MEMBER (JUDICIAL) HON’BLE MR. RAJU, MEMBER (TECHNICAL)

 

Final Order No. A/10798-10799 /2023

 

 

 RAMESH NAIR

DATE OF HEARING: 09.12.2022 DATE OF DECISION: 06.04.2023

 

 

Both sides are in appeal against the impugned order. As both the appeals are arising out of a common order-in-appeal No. 235/2012(STC)/AK/Comm.(A)/Ahd. Dtd. 28.09.2012, therefore both the appeals are taken up for disposal by a common order.

 

2. The brief facts of the case are that M/s. Crystal Metals Pvt. Ltd. is engaged in the business of providing taxable services falling under the category of „Commercial or Industrial Construction Service‟. During the scrutiny of the ST-3 return filed by the appellant, short payment of service tax of Rs.87,740/- was noticed and further detailed information in that context as well as about the business of the Appellant was called for by the Service tax Range office and in response to the same the appellant submitted that they are executing works contract i.e they are supplying & fixing the materials; that their services are at the stage of post construction of any residential or commercial building/complex; that they are actually doing completion & finishing service mainly glass and aluminium fitting & fixing, structural glazing, etc;, that for all those services the contract is with materials &labour; that they were charging service tax on 33% of total contract value till 31.05.2007; that w.e.f. 01.06.2007 service tax has been imposed on execution of works contract, their service falls under the category of works contract and accordingly they requested to change their category of taxable services to „works contract‟ w.e.f. 01.06.2007 ; and they had charged service taxon gross amount of contract @2% & paid the same as and when the amount were received from the contractee. It was noticed by the department that the said service provider has filed ST-3 returns form 16.06.2005 to 30.09.2007. It is further noticed that the said service provider is availing benefits of abatement @67% on the gross amount charged from any person for providing the said taxable services, in the erstwhile Notification No. 15/2004-ST dtd. 10.09.2004 as amended by Notification No. 19/2005-ST dtd. 16.06.2005 till 01.03.2006 and after that a new Notification  01/2006-ST dtd. 01.03.2006 came into force following the same exemption as contained in Notification No. 15/2004- ST dtd. 10.09.2004. It appears from the definition of Commercial and Industrial Construction Service as given under clause (25b) of Section

 

65 of the act read with Notification No. 15/2004 & 01/2006 that the abatement @67%, is not available for the service providers who provides completion and finishing services as described under sub- clause (c) of clause (25b) of Section 65 of the Act. It appears that the service provided by the said service provider clearly falls under sub- clause (c) ibid and therefore they were required to pay service tax on the gross amount received for providing the said taxable service. It also further appeared that the benefit of paying service tax @2% as works contract service is also not available to the Appellant in view of the clarification under circular No. 98/1/2008-ST issued F.No. 345/6/2007- TRU dtd. 04.01.2008 wherein it has been specifically stated that in respect of revision of classification to works contract service from the respective classification and payment of service tax from the amount received on or after 01.06.2007 under the composition scheme, that vivisecting a single composite service and classifying the same under two different taxable services depending upon the time of receipts of the consideration is not legally sustainable. Besides, the appellant had never approached the department for any amendment had inquired them. Thus it appears that, the said service provider was liable to pay service tax during the period 16.06.2005 to 30.09.2007 to the tune of Rs. 20,79,896/-. Whereas they have only discharged service tax liability to the tune of Rs. 5,99,371/- and has thereby short paid service tax to the tune of Rs. 14,80,525/-. Accordingly Appellant was issued show cause notice dated. 02.03.2010 proposing recovery of Service tax of Rs. 14,80,225alongwith interest and imposition of penalties under Section 76,77 & 78 of the Act.

 

 

3. In adjudication vide Order-In-Original 30.11.2011 demand was confirmed with interest and penalties. Being aggrieved by the order, Appellant filed appeal before the Commissioner (Appeals), who vide

 

impugned Order-In-Appeal confirmed the service tax demand and imposed the penalty under Section 77 and 78 of the Act. However, the penalty under Section 76 was waived. Aggrieved by the confirmation of demand, the Appellant – assessee is now before the Tribunal. The department has filed Appeal against the impugned order of Commissioner (Appeals) who has set aside the penalty imposed under Section 76 of the Finance Act, 1994.

 

 

4. The LearnedAdvocate Shri Rahul Gajera appearing for the assessee- appellant submits that the lower authorities have nowhere held that the activity undertaken by the appellant was not execution of „works contract., they have refrained from giving any finding on this aspect. But the only stand taken by the department post 01.06.2007 was that the appellant did not formally file any letter exercising the option to pay tax under composite scheme. This is an implicit admission that the services were execution of „works contract‟. The question of exercising the option can arise only once it is admitted that the service in question was „works contract. There is no allegation or finding that the nature of the Appellant‟s activity was different prior to 01.06.2007. Therefore there is no basis or reason to contend that the activity was „works contract‟ only from 01.06.2007 and not for the prior period. The services provided by the appellant were always execution of works contract. Further, for the purpose of VAT, the activities undertaken by them were classified as works contract even prior to 01.06.2007.

 

 

5. He argued that prior to 01.06.2007, there was no tax on works contract. Since the activity always amounted to „works contract‟ it was not taxable prior to 01.06.2007. Prior to 01.06.2007, the activity was not taxable under the heading „Industrial /Commercial Construction‟ becausethe activity was „works contract‟ and mere rendering of a

 

service. There is no basis or justification in classifying the same activity under two different categories for two different periods. Appellant activity was ab-initio “works contract” and hence service tax was payable only from 01.06.2007.

 

 

6. Without prejudice, he also submits that Ld. Commissioner (Appeals) has failed to appreciate that the activities undertaken by the appellants were not merely completion and finishing. It involved substantial works because the wall erected from structural glazing was not supported by the bricks In the absence of the facade, the building will only be a structure of beams and pillars without outer walls. The building would not come into existence without the outer wall- even if such wall is of glass or aluminum. Therefore, where the glazing in not supported by an inner wall, the glazing cannot be said to be completion or finishing but it has to be considered as part of the construction of the building. The Ld. Commissioner (Appeals) failed to appreciate the activity of appellant. The building will not come into existence if the outer wall is not constructed. Therefore, where the outer wall comprises of the glazing alone, the glazing work is not a completion or finishing work. The lower authorities have erred in ignoring the submission of appellant and further in holding that the activity was completion & finishing service.

 

 

7. He also argued that no formal option was required for availing the composition scheme under the “works contracts”. Payment of 2% of service tax itself amounted to exercise of the option by the appellant. Further such option can be exercised from contract to contract. As service provider can choose to pay service tax under composition scheme for one contract and can simultaneously choose to avail valuation under Rule 2A for another contract and that he cannot have different options for different portion of a single contract.

 

 

 

8. He also submits that the benefit of composition schemeintroduced vide Notification No. 32/2007 –ST is available even where the contract was entered prior to 01.06.2007. The benefit is of course subject to the condition that no tax is paid on such contract till the assessee opted for the composition scheme.

 

9. Hefurther submits that appellant had furnished before the 

 

Commissioner (Appeals) details of the material consumed for execution of the contracts, duly certified by a Chartered Accountant. The appellant claimed benefit of the Notification No. 12/2003-ST which exempted the value of the material consumed in providing the service. Even if the activity is considered as „completion and finishing‟ and consequently abatement is denied, appellant are entitled for notification No. 12/2003- ST wherein value of the material is allowed to be deducted from the gross contract value. However Ld. authority has denied the benefit only on the ground that it was not claimed by the appellant while paying the tax and is an „afterthought‟.

 

 

10. On limitation he submits that the show cause notice wasissued on 02.03.2010 for the period 16.06.2005 to 30.09.2007 is hit by limitation. The department was always aware that the appellant was paying tax under composition scheme. This was evident from perusal of the return filed by the appellant. Therefore, the allegation of suppression of facts and intention to evade are both incorrect. The Range Superintendent by his letter dtd. 17.01.2008 pointed out some discrepancies in the ST-3 returns filed by the appellant for the half year ending, September 2007. In the said letter he had sought the details of abatement @67% availed by the appellant. Appellant vide letter dtd. 15.02.2008 replied to the said letter  17.01.2008 and further

 

requested to change the category of service from “construction of complex service” to “works contract service”. Appellant by their letter dtd. 30.06.2007 had requested the Range officer to amend the category of services to “Execution of Works Contract”. Therefore it cannot be held that the appellant did not inform the department about their intention to opt for change of service category.

 

 

11. The Ld. Authorized Representative Shri Tara Prakash appearingfor the Revenue opposed the contention of Ld. Counsel and reiterated the findings made by the Ld. Commissioner.

 

 

12. He also reiterated the ground of appeal of department and submits that Ld. Commissioner (Appeals) has committed gross error of law by setting aside the penalty under Section 76 of the Finance Act,

 

 

13. We have carefully considered the submissions from both the sides and perused the records.On going through the entire facts of the case we are of the view that the case can be disposed of on the ground of limitation itself.

 

14. We find that the issue involved in this case is regarding the demand of differential amount of service tax for the period 16.06.2005 to 30.09.2007 on the ground that the appellant has availed in-eligible benefit of notification by discharging the service tax liability by availing abatement of 67% and paid service tax only on the 33% of the gross amount of the bills and that they are not eligible for works contract service.We find from the records that appellant had been filing the ST-

3 returns regularly to the Jurisdictional Range officers. It is on record that the said Service tax returns were scrutinized by the Jurisdictional

 

officer on 17.01.2008 and he pointed out that there is short payment of service tax of Rs. 87,740/-. We have seen the correspondences entered into between the appellant and the Revenue. Superintendent‟s letter dated 17-01-2008 addressed to the appellant is as under:

 

 

“Subject : – Discrepancies noticed in the ST-3 returns:

 

 

Please refer to the ST-3 return for the half year ending April 2007 to September 2007 filed by you , to this office.

 

On scrutiny if the said return filed for the service category of Commercial Construction Service, it is found that you have short paid the Service tax of Rs. 87,740/-. The detail calculation if the said short payment is as under :

 

You are therefore, requested to pay the Service tax amount of Rs. 87,740/- short paid, along with interest, immediately under intimation to this office, to avoid any action, that may be taken, according to the Service tax Act and Rules made there under. You are also requested to provide the details of abatement @67% taken to arrive at the taxable value.”

 

In response to the above letter, the appellant vide their letter dtd. 15.02.2008 submitted the clarification. The said undisputed facts also admitted in para 2 of the impugned show cause notice also.

 

 

15. It becomes clear from the above correspondences that the factthat the appellant were charging service tax on 33% value after availing abatement on their services till 31^st May 2007 and w.e.f. 01.06.2007 they have charged service tax on gross amount of contract @2% was in the knowledge of the Revenue itself from ST-3 returns. However show cause notice to the Appellant was issued on 02.03.2010. Inasmuch as the entire information was in the knowledge of the Revenue, the longer period of limitation is not In view of these facts the show

 

cause notice should have been issued within the normal period of one year as prescribed under Section 73(1), whereas the show cause notice for the period 16.06.2005 to 30.09.2007 was issued on 02-03-2010 i.e. after prescribed limit of one year. As per the above fact, there is no suppression of fact on the part of the appellant. Therefore, the demand raised in the show cause notice is clearly time-barred.

 

 

16. We,therefore, set aside the impugned order and allow the appeal of appellant –assessee with consequential relief, if any as per law and consequently dismiss the appeal filed by the revenue.

 

(Pronounced in the open court on 06.04.2023)

 

(RAMESH NAIR) MEMBER (JUDICIAL)

 

NEHA

(RAJU) MEMBER (TECHNICAL)