M/s. J R Construction Co. vs C.C.E. And S.T., Jaipur-I

Stay application along with appeal has been filed against Order- in-Appeal dated 28.08.2013 which upheld the Order-in-Original dated 30.11.2011

except to the extent of allowing cum-tax benefit as a consequence of which the impugned demand was reduced from Rs.24,09,943/- to Rs.21,86,881/-

with corresponding reduction in the penalties imposed under sections 76 and 78 of the Finance Act, 1994. The impugned demand was confirmed on

the ground that the appellant had provided ""Commercial or Industrial Construction Service"" (CICS), 'Maintenance and Repair Service', and 'Site

formation and clearance, excavation and earthmoving and demolish Service' to Giral Lignite Thermal Power Project during the period 08.06.2005 to

17.10.2008 but did not pay service tax on the gross amount received from the service recipient.

The appellant has contended that (i) it has not been given 67% abatement under notification No. 15/2004-ST on the ground that the value of free

supplies provided by service recipient was not included in the gross amount received. (ii) the entire work was completed prior to 01.06.2007. The

service was rendered under works contracts where the value of the material ranges from 60% to 70% it they paid works contract tax at the rate of

1.5% to the state government. Works contract service became taxable under the Finance Act, 1994 [Section 65(105)(zzzza)] only w.e f 01.06.2007

while the entire service rendition was completed prior to that date, (iii) works contracts were taxable by the state governments and were not liable to

service tax prior to 01.06.2007 and therefore it had not taken registration as it was under a bona fide belief that composite (works) contracts were not

taxable prior to 01.06.2007, (iv) there was no suppression or wilful misstatement and the entire demand was time-barred

The Id. Departmental Representative reiterated the contentions contained in the impugned order adding that not indicating the impugned demands

under each service is not fatal.

We have considered the contentions of both sides. We agree with the contention of the appellant that it was eligible for 67% abatement on the

gross amount received (without including the value of free supplies) in the wake of the Judgement of CESTAT in the case of Bhayana Builders (P)

Ltd. Vs. CST, Delhi [2013 (32) STR 49 (Tri. - LB)]. We also find that the impugned demand has been confirmed under three different services

without identifying as to how much demand pertains to each of them. However even if the non-identification of the components of the impugned

demand under each of the services under which the impugned demand is confirmed is not taken to be fatal, the fact remains that the appellant right

from the very beginning including at the time of adjudication by the primary adjudicating authority has been strongly pleading that the service was

rendered under composite (works) contracts on which it paid works contract tax to state government and such works contracts in its bona fide belief

were not liable to service tax under the Finance act 1994 prior to 01.06.2007 when the works contract service was introduced under the Act of 1994.

In paragraph 154 in Chapter XIII Part B of the speech of the Hon'ble Finance Minister's (budget 2007 - 08) it was stated as under:-

State governments levy a tax on the transfer of property in goods involved in the education of works contract. The value of services in a

works contract should attract service tax. Hence, I propose to levy service tax on services involved in the execution of a works contract.

Thus, it is evident that the appellant was not unjustified in holding the reasonable belief that works contracts were not taxable under the Finance Act,

1994 prior to 01.06 2007 because even the speech of the Hon'ble Finance Minister quoted above gave the same impression. Indeed there was a great

deal of confusion whether works contracts were vivisectable and liable to service tax prior to 01.06.2007, so much so that the Hon'ble President

CESTAT setup Larger Bench of five Members to decide the issue and the issue was thus decided by the Larger Five-Member Bench of CESTAT in

the case of L&T vide Interim Order No.IO/ST/72-74/2015 dated 20.03.2015. In these circumstances, it is not possible to sustain the allegation of

wilful misstatement / suppression of facts on the part of the appellant. That being so, the entire demand is fattally hit by time-bar as the Show Cause

Notice was issued on 23.06.2010 while even as per the Show Cause Notice the demand pertains to the period 08.06.2005 to 17.10.2008 and thus the

entire impugned demand is beyond the normal period of one year.

In the light of the foregoing, we do not find the impugned demand sustainable and therefore we waive the requirement of pre-deposit and allow the

appeal.