2009 (3) TMI 897 - AT - Service Tax

Summary

Issues:
1. Requirement of pre-deposit of service tax liability, interest, and penalty.
2. Applicability of service tax on construction activities.
3. Interpretation of works contract prior to 1-6-2007.
4. Circular by the Board regarding service tax on "Construction of Residential Complex."

Analysis:
1. The judgment dealt with the requirement of pre-deposit of service tax liability, interest, and penalty. The appellants were directed to pre-deposit a substantial amount. However, the appellants had already discharged a significant portion of the tax liability. The learned Advocate argued that for the material used in rendering services, if sales tax is paid, then no service tax would be leviable. Citing previous cases, the Advocate highlighted that the balance amount representing the value of goods and materials had been paid as per the Karnataka Value Added Tax Act, 2003. The Tribunal, considering the submissions, ordered a waiver of pre-deposit of the balance amount of service tax, interest, and penalty until the appeal's disposal. No recovery was to be made even after 180 days from the order date, given the substantial amount involved.

2. The issue of the applicability of service tax on construction activities was raised in the judgment. The Advocate pointed out that the Board had issued a Circular stating that the appellant was not liable to pay service tax under the category of "Construction of Residential Complex." Additionally, the Advocate referenced previous Final Orders by the Tribunal where it was held that if sales tax is paid for the material used in services, no service tax would be leviable. The Tribunal acknowledged the strong case on merits presented by the appellants and ordered the waiver of pre-deposit for the balance amount of service tax, interest, and penalty.

3. The judgment delved into the interpretation of works contracts before 1-6-2007. The Advocate argued that for activities falling under "works contract" prior to this date, no service tax is leviable. The Tribunal considered this argument along with the Circular issued by the Board and the previous decisions on similar issues. Based on the submissions and the legal provisions, the Tribunal ordered the waiver of pre-deposit for the balance amount of service tax, interest, and penalty until the appeal's disposal.

4. The Circular issued by the Board regarding service tax on "Construction of Residential Complex" was a significant aspect of the judgment. The Advocate highlighted the Circular to support the argument that the appellant was not liable to pay service tax under this category. The Tribunal took note of this Circular, along with the other submissions, and decided to waive the pre-deposit of the balance amount of service tax, interest, and penalty until the appeal's final disposal.