The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) recently ruled that benefit of the works contract composition scheme cannot be denied to the Assessee merely on the ground of failure to file any intimation.
The assessee in the instant case engaged in providing erection, commissioning and installation services and also claimed benefits exemptions under the works contract composition scheme.
During the assessment period, the Assessing Officer noticed that the Assessee has failed to file any intimation or option to the department opting to the payment of service tax under the composition scheme and accordingly denied the claim of the Assessee and computed the service tax amounting to Rs. 23,78,205 along with payment of interest and penalties under various sections of the Finance Act 1994.
Thereafter the Assessee carried the issue before the Tribunal and counsel for the Assessee advocate Rinki Arora submitted that will be entitled to the benefit of the Composition Scheme under Works Contract Service; the same has been denied by the Adjudicating Authority for the sole reason that the appellant has failed to file any intimation or option to the Department opting for the payment of Service Tax under the Composition Scheme. Further, she argued that if the benefit of the scheme is extended, the total liability of Service Tax will come down to an amount of about Rs. 10 lakhs which already stands paid by the Assessee.
On the other hand, the Revenue contended that notification provides that the service provider is required to opt for payment of Service Tax under the Composition Rules prior to payment of Service Tax in respect of the Works Contract. But it has found that the Assessee in the present case has opted for such Composition Scheme after they started making payment of Service Tax under the Works Contract Scheme. By holding the reason for failure to file the intimation prior to payment of Service Tax under WCS the authority denied Assessee’s claim.
After considering the rival submissions and perusing the materials on records, the Tribunal consists of Judicial Member S.K. Mohanty and Technical member V. Padmanabhan observed that “there is no justification for denying the benefit of payment of Service Tax under the Works Contract Composition Scheme. Therefore order passed by the lower authorities cannot be sustained in its present form”.
The division bench further observed that “the activity is eligible to be classified as a Works Contract Service, the bench examined whether they are eligible for paying duty at the lower rate under the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. It is an admitted fact that the Assessee Company had started paying tax under the Works Contract Composition Scheme is quite evident from the rate of tax reflected in the ST-3 returns. In any case, they had exercised the option on during the year 2007, the substantial benefit cannot be denied for procedural deficiency of delay in opting for Works Contract Service by a specific declaration under Rule 3. Therefore the bench set aside the impugned order and remands the matter to the Adjudicating Authority for deciding the issue de novo after extending the benefit of the Works Contract Composition Scheme and quantify the Service Tax payable thereon.
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