M/S. NAGARJUNA CONSTN. CO. LTD. versus GOVERNMENT OF INDIA & ANR.

Citation: [2012] 10 S.C.R. 1064 · Decided: 09-11-2012 · Supreme Court of India · Bench: D.K. JAIN · Disposal: Dismissed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
[2012) 10 S.C.R. 1064 
M/S. NAGARJUNA CONSTN. CO. LTD. 
V. 
GOVERNMENT OF INDIA & ANR. 
(Civil Appeal No. 7933 of 2012) 
NOVEMBER 09, 2012 
[D.K. JAIN AND ANIL R. DAVE, JJ.] 
Taxation - Service Tax - On works contract - Assessee 
paying service tax prior to 1.6.2007 under the categories 
C falling under Clauses (zzd), (zzq) and (zzzh) of s. 65 (105) of 
Finance Act, 1994 -Amendment of s. 65 (105) w.e.f. 1.6.2007 
introducing clause (zzzza) - Works Contracts Rules, 2007 
introduced giving an option for Composition Scheme @ 2% 
of the gross amount charged on the works contract - Circular 
o No. 981112008- ST dated 4.1.2008 clarified rule 3(3) of 2007 
Rules whereby the assessee who had already paid tax under 
the old provisions i.e. prior to 1.6.2007, was not entitled to the 
Scheme under 2007 Rules - Vires of the Circular challenged 
by the assessee, in a writ petition - High Court upheld the 
E validity of the Circular - On appeal, held: High Court rightly 
upheld the validity of the Circular - The Circular merely 
explains r. 3(3) of 2007 Rules, so as to provide guidelines -
Sub-rule (3) of Rule 3 provides that in order to avail benefit 
of Rule 3, the assessee must opt for it, before payment of 
F service tax - The appellant-assessee having already paid the 
service tax and opting for the benefit under r. 3 thereafter, not 
entitled for the benefit - The Circular is neither contrary to the 
Finance Act nor to the rules made thereunder - The Circular 
or r. 3(3) also cannot be said to be discriminatory - Finance 
G Act, 1994- s. 65(105) (zzd), (zzq), (zzzh) and (zzzza)- Works 
Contracts (Composition Scheme for Payment of Service Tax) 
Rules, 2007 - r. 3(3) - Circular No. 981112008-ST dated 
4.1.2008. 
H 
1064 
NAGARJUNA CONSTN. CO. LTD. v. GOVERNMENT 1065 
OF INDIA & ANR. 
Appellant executed various contracts which were in 
A 
the nature of Composite Construction Contracts. Prior to 
1.6.2007, it paid service tax under the categories of 
taxable services falling under Clauses (zzd), (zzq) and 
(zzzh) of Section 65 (105) of Finance Act, 1994. Sub-
section (105) of s. 65 was amended introducing Clause 
B 
(zzza) w.e.f. 1.6.2007 vide Notification No. 23/2007 dated 
22.5.2007. 
Works Contracts (Composition Scheme for Payment 
of Service Tax) Rules, 2007 was introduced. Under the 
C 
Scheme, an option of composition was offered @ 2% of 
the gross amount charged on the works contract. Prior 
to the composition, the effective tax rate under the other 
category of Services would work out to be approximately 
3.96% of the gross amount. 
D 
The appellant wanted to opt for the scheme, but the 
Department through the Circular No. 98/1/2008-ST, dated 
4.1.2208, clarified Rule 3(3) of 2007 Rules. In view of the 
clarification, the appellant, who had paid the service tax 
prior to 1.6.2007, was not entitled to change the 
E 
classification of the single composite service under the 
Composition Scheme. 
As the appellant had classified the contracts entered 
prior to 1.6.2007 under the category of 'works contract 
service' and had started discharging the service tax 
liability at the rates specified under 2007 Rules, Show 
Cause Notices were issued to the appellant for recovery 
of difference of service tax payable by it alongwith 
interest and penalty. 
The appellant filed writ Petition, challenging the vires 
of the Circular dated 4.1.2008. The High Court dismissed 
the petition. Hence, the present appeal. 
Dismissing the appeal, the Court 
F 
G 
H 
1066 
SUPREME COURT REPORTS 
[2012] 10 S.C.R. 
A 
HELD: 1. The High Court did not commit any mistake 
while upholding validity of the Impugned Circular. The 
Impugned Circular has only explained the contents of 
Rule 3 (3) of Works Contracts (Composition Scheme for 
Payment of Service Tax) Rules, 2007 so as to provide 
B guidelines to the Revenue Officers.On perusal of Rule 3 
(3) of the 2007 Rules, it is very clear that the assessee who 
wants to avail of the benefit under Rule 3 of the 2007 
Rules must opt to pay service tax in respect of a works 
contract before payment of service tax in respect thereof 
c and the option so exercised is to be applied to the entire 
works contract and the assessee is not permitted to 
change the option till the said works contract is 
completed. [Paras 25, 26 and 27] (1077-D-G] 
2. In the instant case it is an admitted fact that the 
D appellant-assessee had already paid service tax on the 
basis of classification of works contract which was in

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