By TIOL News Service

MUMBAI, OCT 13, 2013: THE appellant undertook completion and finishing services involving providing of glass facade for the buildings using glass sheets and aluminium channels.

On 10/9/2004, the appellant registered itself for paying service tax under the FA, 1994 under the head Commercial and Industrial construction services. The appellant also paid service tax under the aforesaid head after claiming the benefit of notification No.1/2006-S.T. By Finance Act, 2007, the Act was amended and a new head of service namely Works Contract Services was brought into statute with effect from 1/6/2007. Consequent to the above amendment, the appellant registered itself under the aforesaid head and started paying service tax under the Works Contract Services.

On 10/5/2010, a demand notice was issued by the Commissioner of Service Tax invoking the extended period and demanding a sum of Rs.3.74crores for the period 2005-06 to 2008-09 and the basis of the above notice was that the appellant is not entitled to the benefit of Notification No.1/2006-ST as the services provided by the appellant is of finishing and completion services under the head Commercial or Industrial construction.

At the time of adjudication, the appellant made an alternate submission that even if they are not eligible under Notification No.1/2006-ST, they would still be eligible for benefit of notification 12/2003-ST which provided for exclusion of value of goods sold or supplied while rendering the service, provided no credit of duty paid on such goods and materials sold has been taken under the provisions of CENVAT Credit Rules, 2004. Inasmuch as since the appellants had not taken credit they are eligible for the benefit of notification. However, the adjudicating authority did not accept this plea and disallowed the benefit under Notification No.12/2003-ST and confirmed the service tax demand of Rs.3.74 crore for the period 18/04/2006 to 09/05/2008 along with interest thereon apart from imposing penalties under Section 76, 77 & 78 of the Finance Act, 1994.

Being aggrieved, the appellant filed an appeal and the CESTAT while directing the appellant to pre-deposit an amount of Rs.1.50 crores held that the appellant is not entitled to the benefit of Notification No.12/2003-STsince the appellant had failed to produce any evidence in respect of the goods/material being sold while providing the services.

This order was challenged and vide Order dated 05/12/2012 - (2012-TIOL-1088-HC-MUM-ST) the Bombay High Court set aside this stay order of the appellate Tribunal and directed the Tribunal to consider afresh. While ordering so, the High Court observed thus -

"7) We find that the Tribunal in the impugned order has proceeded on the basis that no evidence with regard to sale of goods and materials used in providing services was led by the appellant. This ignores the evidence led before the Commissioner in adjudication proceedings. We find that the evidence of the value of goods supplied was on record and the Tribunal has not taken even a prima facie view on the same. The works contract/job work may not separately provide for sale of the goods but may be a composite amount for doing the work. Therefore, the supply value of goods has to be understood in the context of the work contract/job work contract to determine whether it included in it also the sale of goods. Besides, it is the contention of the appellant that the demands are barred by limitation as well as the duty amount has been wrongly computed in the show cause notice and if the correct rate for Works Contract Services under the composition scheme at 4% is applied the appellant would be entitled to refund of service tax."

The matter was heard by the Bench recently.

The appellant submitted that they had produced documentary evidences before the adjudicating authority by way of copies of VAT returns, balance sheets, purchase documents and invoices indicating sale of aluminium panels and glass sheets. However, the adjudicating authority has rejected this contention of the appellant on the ground that completion and finishing services by its nature would not involve the supply and sale of goods.

It was further submitted that they had been paying service tax on the completion and finishing services since 30/11/2004 under the category of construction services but later realized that they were not required to pay service tax on these activities since the definition of construction service was amended to include the completion and finishing services only with effect from 16/06/2005. Suffice to say that the activity undertaken by the appellant was known to the department and, therefore, extended period of time could not have been invoked to confirm the demand in the instant case. It was also submitted that they would able to produce the documentary evidence substantiating the claim that they have sold the goods during the rendering of completion and finishing service on which they have paid VAT/ST under the category of works contract service.

The Revenue representative reiterated the findings of the adjudicating authority and submitted that in the absence of any documentary evidence, the decision given by the adjudicating authority is correct in law.

The Bench observed -

"5.1 Notification No.12/2003-ST dated 20/06/2003 provides for excluding the value of goods and materials sold by the assessee to the recipient of service for the purpose of computation of service tax liability. This notification applies to all the services including completion and finishing services rendered by the appellant herein. If that be so, benefit of notification cannot be denied to the assessee and has to be allowed, if the assessee has fulfilled the terms and conditions of the notification. The only condition which needs to be satisfied for availing the benefit is that no credit of duty paid on such goods and material sold has been taken under the provisions of CENVAT Credit Rules, 2004. The appellant has produced before us the copies of VAT returns, copies of balance sheets, copies of purchase invoices and sample copies of sale invoices indicting that they have sold materials such as aluminium products and glass products for the completion and finishing services undertaken by them for their various clients. From these documents, it is evident that the appellant has discharged VAT/CST liability. In view of this, the matter has to go back to the adjudicating authority to verify the claim of the appellant that they have paid VAT/CST in respect of the goods sold by them during rendering of completion and finishing services and therefore, they are eligible for the benefit of notification No.12/2003-ST. The appellant also submits that if the abatement under Notification No.12/2003 is allowed, bulk of the demand would disappear and if any liability to pay differential tax arises, they would discharge the same, subject to issue of time bar. In these circumstances, we remand the case back to the adjudicating authority for considering the claim of the appellant for benefit of notification No.12/2003-ST. The question of time bar is also kept open for the adjudicating authority to consider."

In fine, the appeal was allowed by way of remand.

Back to square one, façade or otherwise!

(See 2013-TIOL-1506-CESTAT-MUM)