Harish Tandon, J. - (1.) Assailing the order dated 9th May, 2014 passed by the Commissioner of Service Tax, Kolkata confirming the demand of the service tax amounting to Rs. 7,33,25,754/- under proviso to sub-section 2 of Section 73 of the Finance Act, 1994 and an equal amount of penalty together with the interest, the petitioner has filed the instant writ petition. The petitioner has further sought for declaration that the Notification No. 7 of 2008 dated 1st March, 2008 enhancing the rate of service tax from 2% to 4% which was further enhanced to 4.8% by Notification No.10 of 2012 dated 17th March, 2012 to be illegal, ultra vires to the Finance Act, 1994 and the Constitution of India.
(2.) The facts, which are more or less undisputed, are adumbrated as below: The petitioner entered into several works contract in the year 2006 & 2007 on a turnkey basis. After coming in force of the Works Contract (Composite Scheme for Payment of Service Tax) Rules, 2007 (herein after referred to as the composite scheme), the petitioner exercised an option under the said scheme and admittedly paid the service tax @ 2% as provided therein. Admittedly the petitioner submitted ST-3 returns for the period from March 2008 to 2011-2012 showing the payment of service tax @ 2% in respect of the services rendered under the works contract. In course of the scrutiny, it was revealed that the petitioner paid the service tax on the value of the works contract @ 2% under the said composite scheme after exercising the option on 26th March, 2008. By notification no. 7 of 2008 dated 1st March, 2008, the rate of service tax was enhanced from 2% to 4% with effect from the date of the notification. Because of the alleged discrepancy, the Commissioner of Service Tax issued a show cause notice cum demand dated 17th April, 2013 demanding the short payment of the service tax amounting to Rs. 7 Crores and odd with interest and penalty. The stand of the department in the said show cause notice, as discernible therefrom, is that after the enhancement of rate of service tax from 2% to 4% and the petitioner having exercised the option on 26th March, 2008, the payment @ 2% of the service tax on the works contract amounts to evasion of the tax. The department further invoked the extended period of limitation as the petitioner suppressed the date of exercise of option and continued to pay service tax at the old rate. A further show cause notice was issued on 21st October, 2013 for evasion of the service tax as the rate of service tax was further enhanced to 4.8% on the basis of the notification dated 17th March, 2012 effective from 1st April, 2012. A further demand was raised for a sum of Rs. 3,17,295/- along with the interest and penalty. Though separate replies were given to the aforesaid show cause notices cum demand but the stand appears to be identical.
(3.) It is categorically stated by the petitioner that the composite scheme which came into effect from 1st June, 2007 gives an option to the service tax provider under the works contract to pay service tax in relation thereto by paying an amount equivalent to 2% of the gross amount charged for the works contract. The said composite scheme puts an embargo on the provider to resile from the said scheme until the completion of the said works contract. It is thus stated that once the service provider exercised an option under the said composite scheme, the rate of service tax at the time of option would continue for entire works contract period and, therefore, any change in the rate of tax on the basis of the subsequent notifications is impermissible, illegal and hit by doctrine of promissory estoppel.;