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ST - Works Contract - No proof is forthcoming from records that earlier contract was cancelled and fresh contract signed on 06.06.2007 merely to avail benefit of composition scheme which came into effect on 01.06.2007: CESTAT

By TIOL News Service

MUMBAI, NOV 28, 2015: THIS is a Revenue appeal.

ASCN was issued to the respondent alleging that they had paid Service Tax under the Works Contract composition scheme from the month of June 2007 but had taken registration only on 29.06.2007. The SCN demanded service tax at the normal rate by disallowing the benefit of composition scheme.

The adjudicating authority while confirming the demand observed that the respondent cancelled the old contract and entered into a new contract to take benefit of composition scheme.

The Commissioner (Appeals) set aside the order passed by the adjudicating authority on two accounts. Firstly, he held that the Order-in-Original went beyond the grounds invoked in the show-cause notice. Secondly, he held that in terms of Rule 4 of STR, 1994, application for registration can be made within 30 days of commencement of business. And further, in terms of Rule 3 of Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, the option to avail the scheme should be exercised prior to payment of Service Tax which was done in the present case. Furthermore, the earlier contract was cancelled as per agreement dated30.05.2007 and new agreement was signed on 06.06.2007 and which were indicative of two distinct contracts, the Commissioner(A) held.

As mentioned, CCE, Nasik is aggrieved with this order-in-appeal and is before the CESTAT.

The Bench, after considering the submissions observed -

++ There is no violation of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. Rule 3 of the Rules requires that the option to pay tax under composition scheme should be exercised before payment of Service Tax. It is seen that the registration under Works Contract Service was taken on 29.06.2007 and the Service Tax was paid on 5th/6th July 2007. In view of this fact as well as the fact that under Rule 4 of Service Tax Rules the registration may be applied for within 30 days of commencement of business, the show-cause notice has no basis. The adjudicating authority proceeded to pass the Order on a completely fresh ground and therefore the order is liable to be set aside on this ground alone.

++ The Commissioner (A) recorded a clear finding that in the absence of any evidence to show that the new contract was merely an eyewash is not supported by any documentary evidence. No proof is forthcoming from the records that the earlier contract was cancelled and fresh contract signed on 06.06.2007 merely to avail the benefit of a composition scheme which came into effect on 01.06.2007. Revenue has not even cited the details of the old contract and the new contract and compared the two to come to the conclusion that they were same and the change of contract was not a bonafide act.

The Revenue appeal was dismissed.

(See 2015-TIOL-2531-CESTAT-MUM)


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