2025-VIL-25-CESTAT-ALH-ST
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SERVICE TAX CESTAT Cases

Service Tax - works contract service, composite invoice, partial reverse charge mechanism, penalty - The appellant was engaged in providing 'Works Contract Service' i.e. Erection, Commissioning and Installation services of boiler, ESP etc. The department raised a demand of service tax on the total consideration received by the appellant during 2014-15, treating the entire amount as value of taxable services - Whether the entire amount received by the appellant can be considered as taxable value of services or it includes non-taxable value of goods - HELD - the department failed to identify the nature of service provided by the appellant before confirming the demand of service tax. The Tribunal observed that as per the Chartered Accountant's certificate, a substantial portion of the consideration (Rs.33,00,650/-) pertained to sale of goods, which is not subject to service tax. The Tribunal relied on the definition of 'works contract' under Section 65B(54) of the Finance Act, 1994 and the judgment of the Supreme Court in Bhayana Builders case to hold that the value of goods supplied cannot be included in the taxable value of services. The Tribunal concluded that no service tax was chargeable on the value of goods amounting to Rs.33,00,650/- - the impugned is set aside order and allowed the appeal of the appellant - Whether the service tax was correctly calculated on the value of services under the 'works contract' as per the partial reverse charge mechanism - HELD - on the remaining amount of Rs.24,67,790/- pertaining to services, the service tax was payable at 12.36% on 40% of the value as per Rule 2A(ii)(A) of the Service Tax (Determination of Value) Rules, 2006. Further, as the appellant was an individual firm, the service tax was payable under the partial reverse charge mechanism as per Notification No.30/12-ST dated 20.06.2012, i.e. 50% by the appellant and 50% by the recipient. The Tribunal concluded that the service tax liability of the appellant amounted to Rs.61,004/- which was already discharged by the appellant before the issuance of the show cause notice - Whether the penalties under Sections 78 and 77(2) of the Finance Act, 1994 and late fee were correctly imposed - HELD - since there was no short payment of service tax, no penalty under Section 78 was imposable. Further, the penalty under Section 77(2) was also not justified as the department did not discuss the reasons for imposing the same. Regarding the late fee, the Tribunal relied on the Board's Circular No.97/08/07-ST dated 23.08.2007 which clarified that filing of returns is not required when the service tax liability is nil. Therefore, the Tribunal held that the imposition of late fee was also unjustified.
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