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ST - Civil work undertaken for Airports Authority of India – Tax computed on cost of materials supplied - service component involved of 25% to 44% - Tribunal order directing pre-deposit of Rs.17.5 lakhs with interest modified: High Court

By TIOL News Service

NEW DELHI, NOV 15, 2015: VIDE an O-in-O dated 18.06.2013, the CCE&ST, Rohtak confirmed a service tax demand of Rs.73,43,863/- for the period 01.04.2006 to 31.03.2011 under "Maintenance or repair service/Works Contract Services/Commercial or Industrial Construction Service (CICS) and also imposed interest and penalties.

In the matter of the stay application filed before the CESTAT, the Tribunal while ordering pre-deposit observed -

ST - Works Contract Services - As services were rendered under Works contract, they are not liable to ST upto 31.05.2006 as works contract service came into existence w.e.f. 01.06.2007 - Benefit of composition scheme for works contract service has not been extended although rendition of service involved supply of goods and so  prima-facie,  assessee is entitled to said benefits which by itself would bring down the demand to less than 33% of amount confirmed - Assessee has also raised issue of time bar - a decision thereon will require detailed discussion which can be taken up only at time of final hearing - They have deposited Rs. 4.17 lakhs and some part of demand is claimed to be in respect of sale of goods which is not sustainable - Assessee is directed to make pre-deposit of Rs. 17.5 lakhs plus proportionate interest: CESTAT

We reported this order as - 2015-TIOL-2368-CESTAT-DEL.

Unhappy with this order of pre-deposit, the appellant filed an appeal before the Delhi High Court contending that in the facts of the case such an order of pre-deposit was unjustified.

It is the submission of the appellant that the civil work undertaken primarily for the Airports Authority of India ('AAI')were excluded from service tax liability as they formed part of the infrastructure development of the country. Furthermore, the Adjudicating Authority had computed the service tax liability by taking the entire turnover of the Assessee which included the cost of the materials supplied and if only the service component of 25% to 44% is taken into account, in real terms, the highest service tax demand works out to Rs.26.8 lakhs whereas the Tribunal had directed pre-deposit of Rs.17.5 lakhs with proportionate interest and which comes to about 65% of the highest pos sible ST demand. So also, the appellant had already deposited a sum of Rs.4,17,069/- and also plead financial hardship and that the service tax computed to the extent of Rs.5,62,226/- actually pertains to sale of goods.

The High Court observed -

"9. Having considered the above submissions and in light of the demand raised in the present case, the Court modifies the impugned order of the CESTAT and directs that subject to the Appellant depositing a sum of Rs.5 lakhs before the CESTAT on or before 30th November, 2015 his appeal and pending applications shall be considered on merits by the CESTAT."

The appeal was disposed of.

(See 2015-TIOL-2595-HC-DEL-ST)


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