2010 (10) TMI 778 - AT - Service Tax

Service tax along with interest has been demanded works contract - appellants were engaged in providing services of construction of residential complex and failed to discharge service tax liability - in the impugned order Commissioner (Appeals) in Para 10 has observed that irrespective of the works contract between service provider and the service receiver, the nature of services provided was leviable to service tax as per the definition of construction of complex given in the Finance Act Held that - issue involved is complex and requires consideration of definition of construction services, various decisions of Tribunals/Courts and also liability of the appellants during different period. Further, it is also noticed that there are a number of contracts and therefore, the issue is contentious and arguable. In view of the observation of Commissioner (Appeals) that the nature of work is works contract and even then service tax is to be charged, the decisions cited by the learned advocate regarding liability of service tax on works contract prior to 1-6-2007 are relevant and would show prima facie case has been made out by the appellants, requirement of pre-deposit is waived and stay against recovery of service tax, interest and penalties is granted during the pendency of appeal

Summary

Issues: Service tax liability for construction of residential complex during 2005-06 and 2006-07.

Analysis:
The Appellate Tribunal, Ahmedabad, addressed the issue of service tax liability amounting to Rs. 1,14,838 along with interest and penalties imposed on the appellants for providing construction services of a residential complex without discharging the service tax liability. The learned advocate argued that despite the works contract between the service provider and the service receiver, service tax could not have been demanded before 1-6-2007, citing relevant case laws such as Soma Enterprises Ltd. v. CCE&CE&ST [2009] and CST v. Turbotech Precision Engg. (P.) Ltd. [2010] 27 STT 263. Additionally, it was contended that if the construction of the residential complex was intended for the own use of the service receiver, service tax should not be levied. The Departmental Representative, however, argued that since the service provided was for a residential complex, the works contract issue did not arise.

Upon considering the arguments from both sides, the Tribunal acknowledged the complexity of the issue, necessitating an examination of the definition of construction services, relevant judicial decisions, and the appellants' liability over different periods. Noting the contention that service tax could not be demanded for works contracts before 1-6-2007, the Tribunal found a prima facie case in favor of the appellants based on the observations of the Commissioner (Appeals) regarding the nature of the work being a works contract. Consequently, the Tribunal waived the requirement of pre-deposit and granted a stay against the recovery of service tax, interest, and penalties during the pendency of the appeal. The decision highlighted the relevance of case laws in determining the applicability of service tax on construction services and the significance of the nature of the works contract in such scenarios.