2011 (5) TMI 290 - AT - Service Tax

Waiver of pre-deposit - demand - Held that taxability of the value material supplied by contractee in respect of the service provided under Finance Act, 1994 is under challenge before High Court of Delhi - requirement of pre-deposit waived Demand in respect of work contract - pre and post levy of service tax on works contract - Held that - The work is recognized by its nature and incidence of tax depends on the nature of activity. The prospectivity and restrospectivity taxation is not the intention of the Board as is apparent from the Circular. Board has deliberately used the word undergo a change in the Circular. By such conception, Revenue decided to provide a more convenient classification of the past activity considered to taxable under the frame of works contract. - no reason to waive requirement of pre-deposit - stay granted partly.

Summary

Issues:
1. Service tax demand on material supplied by the contractee.
2. Taxability of works contract services post-01.06.07.
3. Classification of services under different entries.
4. Requirement of pre-deposit for tax disputes.

Analysis:

Issue 1: Service tax demand on material supplied by the contractee
The appellant contested a service tax demand of Rs. 18,45,140, comprising two components. The first component of Rs. 4,14,743 related to the levy of service tax on material supplied by the contractee. The appellant argued that since they had no ownership of the material and did not retransfer it while providing the service, this amount should not be included in the assessable value of the taxable service. The Tribunal acknowledged a previous decision against the assessee but noted that the issue was under challenge before the Delhi High Court. Consequently, the Tribunal waived the requirement of pre-deposit for this amount.

Issue 2: Taxability of works contract services post-01.06.07
The second component of the demand, amounting to Rs. 14,81,687, was related to the execution of works contract services that became taxable from 01.06.07. The Circular issued by CBEC clarified the classification of services under works contract post the said date. The Tribunal examined the appellant's work and the Circular. It concluded that the change in classification did not alter the nature of the activity carried out by the assessee. The Tribunal emphasized that the taxability of an activity depends on its nature, and the Circular aimed to provide a more convenient classification without retrospective or prospective implications. Considering the intention of the Board and the nature of the work executed in 2007-08, the Tribunal directed the appellant to make a pre-deposit of Rs. 10 lakhs within a specified period, with the balance amount stayed pending the appeal.

Issue 3: Classification of services under different entries
The appellant argued that the services taxed under different entries had already been subjected to tax under commercial or industrial construction service and construction of complex service. The Tribunal, after considering the submissions, found no grounds to waive the requirement of pre-deposit based on the nature of the activity and the Circular's provisions.

Issue 4: Requirement of pre-deposit for tax disputes
After hearing both sides and examining the records, the Tribunal made a decision regarding the pre-deposit requirement for the disputed tax amounts, taking into account the nature of the activities, relevant Circulars, and previous legal interpretations. The Tribunal directed the appellant to make a specified pre-deposit within a stipulated timeframe, with the balance amount to be stayed pending the appeal process.