Kunjaravel Poundass vs. The Assistant Commissioner Of GST And Central Excise

Facts

The petitioner, Kunjarvel Poundass, filed a writ petition challenging an Assessment Order dated March 22, 2023, passed by the Assistant Commissioner of GST and Central Excise, Madurai II Division. The petitioner was engaged in works contract, including construction of check dams, repairing irrigation tanks, and building government schools and polytechnics. The respondent issued a notice to the petitioner, but no reply was filed. Personal hearings were scheduled on November 18, 2022, December 16, 2022, and December 27, 2022, but the petitioner failed to appear on any of these dates. Consequently, the respondent passed the impugned order. The petitioner's primary contention was that the respondent failed to grant the applicable abatement for works contract.

Held

The Court held that the respondent authority had erred in not granting the applicable abatement for works contract. The Court noted that under Rule 2(ii)(A) of the Service Tax (Determination of Value) Rules, 2006, service tax is payable on 40% of the total amount charged for original works contracts, implying a 60% abatement. Furthermore, if the petitioner was considered registered under the Companies Act, then as per S.No.9 of Notification No. 30/2012-ST, 50% of the service tax was payable by the service provider and 50% by the service recipient. The respondent had imposed 100% service tax without invoking these rules and notifications. Consequently, the Court found it necessary to interfere with the impugned assessment order. The Court quashed the assessment order and directed the petitioner to submit a reply within two weeks. The respondent was then directed to grant a personal hearing and complete the assessment proceedings within eight weeks, with the petitioner being barred from seeking adjournments.

Key Issues

1. Whether the respondent authority erred in not granting the applicable abatement of 60% on the total amount charged for works contract, as provided under Rule 2(ii)(A) of the Service Tax (Determination of Value) Rules, 2006, if the petitioner is considered an individual? 2. Whether the respondent authority erred in not applying the provisions of Notification No. 30/2012-ST dated June 20, 2012, specifically S.No.9, which stipulates a 50% service tax liability for service portion in execution of works contract if the petitioner is registered under the Companies Act? Petitioner's Arguments: The petitioner argued that the respondent failed to grant the statutory abatement of 60% under Rule 2(ii)(A) of the Service Tax (Determination of Value) Rules, 2006, for works contracts. Alternatively, if considered a company, the petitioner contended that only 50% of the service tax was payable as per S.No.9 of Notification No. 30/2012-ST, with the remaining 50% to be paid by the service recipient. The respondent imposed 100% service tax without invoking these provisions. Respondent's Arguments: The respondent did not record any specific arguments in the judgment. The judgment notes that the petitioner did not file a reply to the notice and failed to appear for personal hearings, leading to the ex-parte assessment order.