2013 (12) TMI 624 - AT - Service Tax

Waiver of pre deposit - Commercial or Industrial Construction Service - Works Contract Service - Penalty u/s 75, 77 and 78 - Abatement in relation to commercial or industrial construction service - Held that - despite the specific claim by the petitioner for the benefit of abatement to the extent of 67% of the gross taxable value, the claim for this benefit was unreasonably rejected. Exemption Notification No.15/2004 dated 10.9.2004 and the later Notification No.1/06 dated 1.3.2006 grant abatement in relation to commercial or industrial construction service to the extent of 67% of the gross value, subject to the conditions stipulated thereunder. According to the petitioner, it has fulfilled and has not violated any of the specified conditions but exemption was nevertheless denied on the sole ground that the value of supply of material free of cost by the service recipient was not included in the gross value submitted for tax, by the petitioner. Prima facie, rejecting the claim for abatement on this ground, recorded in the adjudication order, appears to be unsustainable - Conditional stay granted.

Summary

Issues:
Waiver of pre-deposit and stay of proceedings regarding service tax demand for "Commercial or Industrial Construction Service" and "Works Contract Service"; interpretation of relevant provisions; applicability of extended period of limitation; distinction between turnkey projects and larger projects; liability to tax for services provided to government entities; eligibility for abatement benefits; rejection of abatement claim.

Analysis:
1. The judgment concerns the waiver of pre-deposit and stay of proceedings following an adjudication order confirming substantial service tax demands for "Commercial or Industrial Construction Service" and "Works Contract Service" for specific periods. The petitioner contested the demands, arguing various contentions to distinguish the case from precedent judgments and challenge the application of the extended period of limitation.

2. The petitioner had entered into multiple contracts during the relevant period, with a focus on works contract services and industrial or commercial construction services. The adjudication order invoked the extended period of limitation and confirmed the service tax demands, leading to the appeal before the Tribunal.

3. The Tribunal analyzed the petitioner's contentions, including the argument that works contracts must relate to a project and the provision of services to government entities should not be considered commercial. However, the Tribunal found no merit in these contentions, emphasizing the legislative definitions and the absence of a bona fide belief to escape the extended period based on intent to evade tax.

4. The judgment also addressed the distinction between "Commercial or Industrial Construction Service" and "Works Contract Service," highlighting the legislative context and the denial of abatement benefits to the petitioner. The Tribunal found the rejection of abatement on the grounds of excluding the value of material supplied by the recipient to be unsustainable.

5. Ultimately, the Tribunal granted the waiver of pre-deposit and stay of proceedings subject to specific conditions, requiring the petitioner to remit the service tax amount and a portion of the tax related to commercial or industrial construction service within a specified timeframe. Failure to comply would result in the dissolution of the stay granted.

6. The judgment provides a detailed analysis of the legal provisions, precedents, and contentions raised by the petitioner, ultimately upholding the service tax demands while granting certain reliefs and setting conditions for compliance. The decision reflects a thorough examination of the issues involved and the application of relevant legal principles in tax matters.