While hearing the case of Bridge & Roof Company Limited vs. CCE, Delhi bench of the Customs Excise & Service Tax Appellate Tribunal held that the benefit of the composition scheme cannot be denied to an assessee who has entered into contracts prior to 1.07.2007.
The assessee in the instant case engaged in providing Construction Services/ Erection Commissioning or installation Services. During the year it entered into a contract with M/s BHEL for a power project on 15/12/2006.
The Supreme Court, in Larsen and Tubro Ltd, held that the works contracts are liable to Service Tax only w.e.f. 01/06/2007.
From January 2007 onwards the assessee-Company registered with the department and paid Service Tax under the category of Commercial or Industrial Construction Service. After the introduction of ‘Works Contract Service’, they started paying Service Tax categorizing the service under Works Contract Service and availing composition rate as per Works as per the composition rules 2007.
During the assessment proceedings, the revenue objected the said payment as per the composition scheme by holding that the Composition scheme will not be available to an ongoing contract on which service tax has been paid prior to 01/06/2007 under a different classification and also proceedings initiated against the assessee and penalties were also initiated on the assessee.
Aggrieved by the order of the revenue assessee approached the tribunal on appeal. Before the tribunal assessee contended that the contract under which they have executed work for M/s BHEL is of composite nature, which involving the supply of goods as well as the provision of service. And the assessee further submitted that after the introduction of Works Contract Service and they have discharged due service tax under such category after availing the composition scheme in terms of 2007 Rules. They were of the view that they are eligible for availing the said rules.
After considering the rival submissions of both the parties, the tribunal bench comprising of Judicial Member S.K.Mohanty and Technical Member B.Ravichandran observed that the sole issue in the instant case is whether the assessee company is eligible to tax as per the composition scheme under Rules, 2007 or not. While perusing the available material facts on records it is cleared that the assessee in the present case has entered into a contract with the aforesaid company on 15/12/2006 which is prior to 01/06/2007.
In terms of decision of Honorable Supreme Court composite Work Contract are not liable to Service Tax prior to 01/06/2007.
“In terms of decision of Hon’ble Supreme Court in Larsen and Tubro,(supra) composite Work Contract are not liable to Service Tax prior to 01/06/2007 as there was no machinery provision for identifying this service portion or for quantification of tax. Admittedly, the appellants are liable to Service Tax for the work executed in pursuance of the impugned contract only w.e.f. 01/06/2007 as such any payment of Service Tax prior to 01/06/2007 will not bar the appellants from following the procedure as available under 2007 Rules,” the bench said.
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