S.V. JIWANI Vs. CCE&ST

JUDGEMENT

(1.) THIS appeal is directed against OIO No. 07/DEM/Vapi/2011 dated 31st March 2011. The relevant facts that arise for consideration, after filtering out unnecessary details are that appellant assessee herein are engaged in providing taxable services in the category of Work Contract Services, commercial and industrial construction services and transport of goods by road services and hold service tax registration for that purpose. The appellant are also availing facility of cenvat credit on inputs/input services as per the provisions of cenvat credit rules 2004 for the period April 2008 Sept. 2009, the appellant assessee assessed the tax due on the services provided by them and filed statutory returns. The said statutory returns were scrutinized by the range jurisdictional superintendent, and it was noticed by the Supdt. that they have pad service tax and filed cenvat credit on the works contract services. It was jurisdictional superintend s view that in respect of taxable services; works contract services, appellant had no option to pay full service tax and had to pay reduced service tax as per provision of rule 2A of the Service Tax (Determination of values) Rules 2006 and or to pay service tax under composition scheme in terms of work contract (Composition Scheme) for payment of Service Tax Rule 2007. Coming to such a conclusion, show cause notice dated 10/12/2009 was issued to the appellant directing to show cause as to why the cenvat credit availed by them on cement, channels, CTD or TMT bars and other items used for construction of factory shed, building and foundation be not disallowed and interest be charged on such amount and why penalty be not imposed. Such show cause notice was contested by the appellant before the adjudicating authority on various grounds. The adjudicating authority after following due process of law vide impugned order confirmed the demand raised in the show cause notice alongwith interest and as also imposed equivalent amount of penalty on the appellant.

(2.) LD . Counsel appearing on behalf of the appellant would take us through the show cause notice and the OIO. It is his submission that the appellant had paid correct service tax on the correct value of relevant contract executed by them under taxable category works contract services. It is his submission that there is no dispute as to the fact that contract which was entered by them was the works contract which require them to construct the entire factory building for one of their client. It is also his submission that gross consideration which is indicated in the contract included the value of cement, steel etc., procured by the appellant on payment of duty as well as various input services availed for execution of said contract. It is his submission that the appellant availed cenvat credit of the excise duty paid on inputs and input services in terms of the provisions of Cenvat Credit Rules 2004. It is his submission that appellant had many options of discharging the service tax liability under the provisions of Sec. 67 of Finance Act 1994 and decided to discharge the service tax on the entire taxable value of the contract executed by them. After making such submissions, he would take us through provisions of section 67 of the Finance Act 1994. It is his submissions that the amount of contract entered by the appellant was clearly known and determined hence the same would be the correct value or gross value or taxable value in terms of provisions of section 67(i) of the finance Act 1994. It is his submission that there is no prohibition under the act or the rules made thereunder for discharging service tax liability at the full applicable rate on the gross amount charged for rendering services. It is his submissions that the adjudicating authority has erred in imposing on the appellant provisions of rule 2A of Service Tax valuation rules. After reading the said rules, he would submit that the rule specifically begin with an expression subject to provisions of section 67, it would mean that the valuation rules are governed by the provisions of section 67 and the said section would prevail however, the method of valuation of valuation as prescribed in rule 2A of the Service Tax valuation rules needs to be applied only in case of where there is difficulty in determining correct value of works contract.

(3.) LEARNED Department Representative on the other hand would draw our attention to the findings recorded by the adjudicating authority. It is his submission that the appellant has availed cenvat credit of the duty paid on inputs like cement, steel etc., and input services for rendering work contract services. It is his submission that the entire issue is availment of ineligible cenvat credit by the appellant for erection of factory for their clients. It is his submission that the said client could not have availed cenvat credit of duty paid on inputs like steel, and construction materials which are structural and construction materials, which are consumed hence this modus operandi was adopted. It is his submission that when the appellant are accepting that it is work contract services which are provided, they should have discharged the service tax liability on the amount as is required to be calculated under the provisions of Rule 2A of the Service Tax Rules or Rule 3 of Composition Rules. It is his submission that both the authorities were correct in holding that the appellant has done wrong by availing cenvat credit and passing on the same to service recipient.