Customs, Excise and Service Tax Appellate Tribunal

CST, Delhi – III Vs. Shyam Indus Power Solutions Pvt. Ltd.

MANU/CE/0427/2018

18.09.2018

Service Tax

Value of both supply and service is to be added for payment of service tax under composition scheme

The facts of the matter are that, the Respondent/Assessee is registered with the department for various services such as erection, commissioning and installation services; construction services in respect of commercial and industrial buildings and civil structure and work contract service. They are also registered for business support services as well as under GTA services. A show cause notice dated 18th October 2013 came to be issued to the Respondent/Assessee.

The matter was adjudicated by the Commissioner who vide his order has set aside the show cause notice. Feeling aggrieved by the above impugned order of the Commissioner, the Department is in appeal alleging that the order-in-original is not legal and proper and therefore same has been reviewed by Competent Authority under Section 86(2) of the Finance Act, 1994. It has been the contention of the Department that, the Respondent/Assessee by splitting the single work contract into separate contracts had evaded payment of service tax and Adjudicating Authority has failed to appreciate the respondent were engaged in business of execution of EPC contracts pertaining to setting up of that electric service station on turkey basis to various state electricity companies.

From the perusal of the Rule 3(i) of Work Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, it is clear that for determination of the value under the composition scheme, the value of all goods used in or in relation to execution of the work contract need to be included in the serviceable value even when the goods might have been supplied under any other contract for execution of the composite work contract. It is a matter of record in this case that, all the contracts are composite contracts for both supply of goods and services as both the elements are absolute pre-requisite for completion of any turnkey project. It is also of the matter of fact that the Respondent/Assessee has opted for the benefit of composite work contract service and has availed the benefit of Rule 3(i) of Composition Scheme. The value of both supply and service need to be added for payment of service tax under composition scheme.

The scope of composite works contract is clear and should be read together for the purpose of service tax. On overall examination the facts and circumstances of the case, present Tribunal is in agreement with the findings recorded by the Original Authority regarding the composite nature of contract executed by the Appellant and the valuation method that should be followed for discharging service tax liability.

The Appellant is fully aware of the legal implications of service tax liability on composite works contract. Their act of first paying composition rate on what is claimed to be a service contract and later switching over to full rate of payment without composition clearly reveals the knowledge and deliberate intend of the Appellant.

Impugned order is without any merit and is set aside. The matter remanded to the original Adjudicating Authority for purpose to verify the claim of the Respondent/Assessee in his arguments submitted before present Tribunal that, on certain contracts, they have paid full rate of service tax rather than concessional rate of service tax under composition scheme. Appeal is accordingly allowed by way of remand.

Tags : Valuation Tax Evasion

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