CC AND CE AND ST, NOIDA versus M/S INTERARCH BUILDING PRODUCTS PVT. LTD.

Citation: [2023] 7 S.C.R. 977 · Decided: 02-05-2023 · Supreme Court of India · Bench: M.R. SHAH · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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977
CC AND CE AND ST, NOIDA
v.
M/S INTERARCH BUILDING PRODUCTS PVT. LTD.
(Civil Appeal No. 11330 of 2018)
MAY 02, 2023
[M. R. SHAH AND KRISHNA MURARI, JJ.]
Finance Act, 1994 – ss. 64,65(105)(zzq),65(105)(zzzza),66,
67 and 73 – Service (Determination of Value) Rules, 2006 – Rule
2A – CENVAT Credit Rules, 2004 – Payment of service tax – Liability
for – Respondent–assessee was engaged in the business of
manufacture, supply and erection at the site of prefabricated steel
buildings – They paid service tax under the category “commercial
or industrial constructions services” as referred u/s.65(105)(zzq)
of the Finance Act, 1994 – Respondent availed CENVAT credit and
short paid the Service Tax in cash – Revenue was of the view that
the service rendered by the respondent was classifiable under “works
contract service”(chargeable under sub clause(zzzza) of s.65(105)
and it was mandatory for the respondent to either follow Rule 2A of
Service Tax (Determination of Value) Rules, 2006 or adopt
Composition Scheme – Tribunal held that there was no question on
applicability of Rule 2A nor there was any question of forcibly
applying the option of composition scheme and respondent was
entitled to CENVAT credit on inputs – Before the Supreme Court,
the case on behalf of the respondent-assessee was that Rule 2A and
even in the composition scheme the words used are subject to the
provisions of s.67 the assessee had an option to pay the service tax
on the entire contract value and that the Rule 2A is not compulsory
and the composition scheme is optional – Whether an assessee who
is liable to pay service tax under works contract service has the
legal right not to follow Rule 2A nor the composition Scheme on the
ground that in terms of s. 67 of the Act of 1994 an assessee is
entitled to take the total contract value which includes both goods
and services and remit service tax on the entire value as works
contract service and in the process also entitled to avail the CENVAT
Credit – Held: Services rendered by the respondent can be said to
be ‘works contract service’ as per the Finance Act, 1994 w.e.f.
01.06.2007 as per s.64(54) r/w. s. 65(105)(zzzza) – In the case of
[2023] 7 S.C.R. 977
977
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SUPREME COURT REPORTS
[2023] 7 S.C.R.
‘works contract service’ an assessee is liable to pay the service tax
on the service element and the sales tax on the element of goods
transferred pursuant to the contract – The submission of the
respondent made cannot be accepted as it would make Rule 2A and
composition scheme otiose – As per the scheme of the Act the
determination of value of service portion in the execution of the
works contract is to be made as per Rule 2A, however with an option
to the assessee to avail the benefit of composition scheme – Either
the assessee has to go for composition scheme or go for
determination of value as per Rule 2A and the assessee has to pay
service tax on service element and can claim CENVAT credit on the
said amount only – Therefore, the respondent has to pay the service
tax on the value of services as per Rule 2A of the (Determination of
Value) Rules, 2006 and thereafter to avail the CENVAT Credit
accordingly – The impugned judgment and order passed by the
CESTAT is quashed and set aside.
Allowing the appeal, the Court
HELD:1. The service elements have found a statutory
recognition as part of Rule 2A of the Service Tax (Determination
of Value) Rules, 2006 w.e.f. 01.06.2007 which has been referred.
The applicability of Rule 2A has been dealt with and considered
by this Court in extenso in the case of Larsen and Toubro.
Therefore, as per the law laid down by this Court in the case of
‘works contract service’ an assessee is liable to pay the service
tax on the service element/value of the service rendered and the
sales tax/tax on the element of goods transferred pursuant to the
contract. [Para 8.4][1000-B-C]
2. It is the case on behalf of the respondent – assessee that
as in Rule 2A and even in the Composition Scheme the word
used are subject to the provisions of Section 67 the assessee
had an option to pay the service tax on the entire contract value
i.e. on gross amount charged by the service provider and that
Rule 2A is not compulsory and the Composition Scheme is
optional. However, the aforesaid has no substance. If the
submission on behalf of the assessee is accepted in that case
Rule 2A and the Composition Scheme shall become otiose. [Para
8.8][1001-E]
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3. With re

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