By TIOL News Service

MUMBAI, JULY 05, 2010: THE appellant seeks waiver of pre-deposit and stay of recovery in respect of service tax amounting to over Rs.26.8 crores demanded for the period October 2005 to March 2008 and also in respect of various amounts of penalties imposed under various provisions of the Finance Act, 1994. 

The appellant had undertaken different commercial and industrial construction projects at various parts of the country. In respect of certain projects, they paid service tax on the gross amount of taxable value without claiming any abatement but availing CENVAT credit on inputs through out the period or on input service up to 1.3.2006.  In respect of other projects, they paid service tax by claiming abatement to the extent of 67% of the gross taxable value under Notification no. 15/2004-ST dated 10.9.2004 and Notification no. 1/2006-ST dated 1.3.2006 without availing CENVAT credit on inputs during any part of the period of dispute or on input service from 1.3.2006. 

The department issued a show cause notice demanding service tax by denying them the benefit of abatement under the aforesaid notifications.  The Commissioner confirmed the demand with penalties.

Before the CESTAT, the appellant submitted that the very issue framed by the Commissioner for adjudication is beyond the scope of the show-cause notice.  It was further submitted that in similar cases of another construction company, the coordinate Bench at Ahmedabad granted waiver and stay in the case of SMP Constructions Pvt. Ltd. vs. CCE, Vadodara cited as [2009-TIOL-1298-CESTAT-AHM] and [2009-TIOL-1418-CESTAT-AHM].

The Revenue representative opposed the application for stay by arguing that the referred notifications are assessee-specific and, therefore, there is nothing wrong on the part of the adjudicating authority in having raised a demand of service tax from the appellant encompassing all the projects.

The Bench while granting waiver of pre-deposit and ordering stay observed –

“4.     …, we have found prima facie case for the appellant for the reasons stated by their counsel.  The show-cause notice, on the one hand, demanded service tax from the assessee by clubbing the gross taxable values of all the projects and denying the benefit of abatement provided under the relevant notifications, overlooking the fact that, in respect of a few of the projects, the noticee had paid service tax on the gross taxable value by availing CENVAT credit.  On the other hand, the learned Commissioner chose to proceed on a different footing, which is evident from the issued framed by him, which reads thus: “The issue is to be decided whether the noticee is entitled to the simultaneous benefit of the abatement provided under Notification 15/2004 dated 10.9.2004 and thereafter under notification no. 1/2006 effective from 1.3.2006 in one project and the benefit of the CENVAT credit of service tax paid on input service in the other project.”  Apparently, the Commissioner’s decision is on an issue framed beyond the scope of the show-cause notice.  In addition to this, his decision is contrary to the view taken by this Tribunal, albeit prima facie, in similar cases of other construction companies.”

Settled law: When two exemption notifications are simultaneously available the Department cannot insist the assessee to choose one of the notifications and the assessee is at liberty to choose any one of the notifications which is beneficial to him – Aruna Strawboards (P) Ltd. vs. CCE, Hyderabad [2004-TIOL-548-CESTAT-BANG].

(See 2010-TIOL-873-CESTAT-MUM in 'Service Tax')