CMC LTD. Vs. COMMISSIONER OF SERVICE TAX

JUDGEMENT

(1.) WAIVER of pre -deposit of the adjudicated liability of Rs. 15,31,42,774/ - besides Cesses and interest as assessed is the relief sought. The petitioner is a Computer hardware and software producer. It entered into various contracts with banks and non -banking corporate entities for sale, supply and installation of Computers and Software. The several contracts were differently structured and worded but the common refrain, despite the different verbal formulae employed in the several contracts is that the petitioner is required to supply and install specified Computer hardware and software in the purchaser's premises. In respect of some of the contracts, for instance the contract with the National Highway Authority of India, the petitioner treated the transaction as a composite transaction of sale and service as well since according to the petitioner there was installation and commissioning of desk tops, OS Software, Network Printers etc. involved apart from installation of ethernet equipment and associated hardware. The petitioner self -assessed; an assessment based no document, such as the balance sheet, profit and loss account etc., that the value of the service component of the composite contract (with NHAI for instance) was of the order of 2% of the value of the total services provided. This percentage of the total value of the contract was calibrated and offered as the value of the taxable service of 'Erection, Commissioning or Installation' a taxable service under Section 65(39a) of the Finance Act, 1994. The adjudication order discloses no claim by the Petitioner for abatement under Notification No. 1/2006 -S.T., dated 1 -3 -2006, an exemption Notification issued by the Central Govt. in purported exercise of its power under Section 93 of the Act. The adjudicating authority however, rejected the assertion of the petitioner that the service component was only to the extent of 2% of the total value of the contracts; considered the total value of all the contracts entered into by the petitioner with several parties and the consideration received there from as the gross taxable value received for services provided, under Section 65(39a); gratuitously applied the provisions of Notification No. 1/2006 -S.T. and applied the applicable rate of Service Tax on 33% of such value and determined the liability, by applying the benefits under Notification No. 1/2006 -S.T., dated 3 -6 -2006 corresponding to an earlier Notification No. , dated 21 -8 -2003.

(2.) ON true and fair construction of the provisions of Notification No. 19/2003 -S.T. and Notification No. 1/2006 -S.T. it is clear that the benefits of exemptions/abatement may be claimed at the option of an assessee but cannot be imposed by the adjudicating authority. If the adjudicating authority was satisfied that the petitioner's offer of only 2% of the total value of the contracts did not represent the gross value of the taxable services, he should have proceeded to assessment either by calling by further particulars or on a best judgment basis, on the basis of the material on record. He could not have suo motu applied the provisions of the Notification.

(3.) THE several decisions of the Supreme Court and of this Tribunal prima facie, explicate the principle that the value of a transaction which is liable to or has been assessed to levy of sales tax must be considered outside the scope of the taxable value for the purpose of levy of Service Tax, under the Act. This is the core issue in the present appeal also. This apart, the process followed by the adjudicating authority in suo motu applying the benefits of exemptions Notifications and failing to assess the taxable value of the services provided or in analyzing the validity of the petitioner's claim that only 2% of the value of the contracts was attributable to the taxable service component, appears fallacious. For the aforesaid reasons we grant waiver of pre -deposit in full and stay all further proceeding pursuant to the impugned adjudication order pending final disposal of the appeal. This application is accordingly disposed of.