2015 (11) TMI 1661 - HC - Service Tax

Validity of SCN - Classification of service - classified under Works contract or commercial and industrial construction services/construction of residential complex services? - Held that - Inasmuch as the SCN themselves have been challenged in these writ petitions, the interests of justice would be served by relegating the petitioners to the remedy of filing replies to the SCN, so as to get an adjudication of the dispute done by the authorities under the FA, 1994 - matter on remand.

Summary

Issues:
1. Challenge against show cause notices for levy of service tax on construction services.
2. Impugning order confirming demand of service tax based on classification of services.
3. Correct classification of services under different heads for levy of service tax.

Analysis:
1. The petitioners, engaged in construction of buildings, challenged show cause notices for service tax levy under the Finance Act, 1994. They sought reclassification under 'works contract services' from the existing classification under 'commercial and industrial construction services' or 'construction of residential complexes services'. The Supreme Court clarified that for pre-1-6-2007 period, authorities couldn't split composite contracts for selective taxation. The court directed petitioners to respond to show cause notices for adjudication based on service nature and relevant materials.

2. In one petition, the challenge was against an order confirming service tax demand under 'commercial and industrial construction services' or 'construction of residential complex services' classification. The order didn't address the correct service classification, citing inability to argue for an alternate classification after initial declaration. The court found this reasoning flawed in light of the Supreme Court's decision and quashed the order, directing a fresh consideration with a hearing opportunity for the petitioner.

3. The court noted the period covered by the impugned show cause notices from January 2006 to June 2010, with changes in the Finance Act, 1994 regarding service tax levy classifications. It emphasized determining service nature for proper classification, especially in composite service scenarios. The petitioners were advised to approach adjudicating authorities under the Act for dispute resolution, considering the Supreme Court's decision's impact and relevant circulars on service classification. The court dismissed the writ petitions against show cause notices, except for the one challenging the order confirming service tax demand.