2014 (1) TMI 669 - AT - Service Tax

Completion or finished work or renovation or restoration of building or civil structure - Abatement of 67% - Notification No.15/2004-ST dated 10.9.2004 - Bar of limitation - Whether the appellant is eligible for the abatement or not - Held that - services undertaken by the appellant in this case is under the category of repair, alteration or restoration or similar services in relation to building or civil structures. With effect from 2005, renovation was also added to the definition and in 2007; the activity was also brought under works contract but only when the work is undertaken in respect of a new building. Therefore, there is no dispute that the activities undertaken by the appellant are in the category of completion or finished work or renovation or restoration of building or civil structure. The only question that arises is whether the appellant is eligible for the abatement or not. It is noticed that Notification No.15/2004-ST dated 10.9.2004 was the first Notification which provided the benefit of abatement subject to the condition that an assessee should not have availed the benefit of Notification No.12/2003-ST dated 20.6.2003 which provides for exemption to the extent of goods sold during the process of rendering the service subject to conditions - appellants cannot be found fault with if they claimed a bona fide belief that what they were doing was correct. The appellants had taken the registration themselves; were paying service tax regularly; filing returns regularly; moreover the issue as to whether a contract can be divided or not for the purpose of levy of service tax has been referred to 5-Member Bench recently. Reference to 5 member Bench is another important aspect which would show that extended period could not have been invoked in this case - Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the appellant is eligible for abatement in service tax on turnkey contracts for interior infrastructure work?
2. Whether the demand of service tax, interest, and penalties imposed on the appellant is justified?
3. Whether the extended period of limitation can be invoked in this case?

Analysis:

Issue 1: Eligibility for Abatement
The appellant undertakes turnkey contracts involving a combination of services and supply of goods for interior infrastructure work. The services rendered include demolition, pest control, installation of various materials, furniture, air conditioning, electrical fittings, etc. The appellant claimed that these are composite contracts and paid VAT on the goods portion, while paying service tax under the category of 'commercial or industrial construction service'. The dispute arose regarding the eligibility of the appellant for abatement under various Notifications. The Tribunal analyzed the relevant Notifications and found that the appellant could not avail the benefit of abatement under certain Notifications. However, the appellant argued that they were eligible for abatement under a different Notification, supported by records showing substantial supply of goods during service provision. The Tribunal also considered legal precedents supporting the appellant's position on tax treatment of composite contracts.

Issue 2: Justification of Demand
The demand for differential service tax, interest, and penalties was based on the view that the appellant was not eligible for abatement and had underpaid service tax. The Tribunal examined the facts, including the appellant's invoicing practices, VAT payments, and compliance history. It was noted that the show-cause notice was issued beyond the normal limitation period, requiring the department to prove suppression of facts for invoking the extended period. The Tribunal found that the appellant had acted in good faith, paid taxes regularly, and there was no evidence of suppression or mis-declaration. Therefore, the demand for service tax, interest, and penalties was not upheld.

Issue 3: Extended Period of Limitation
The Tribunal considered whether the extended period of limitation could be invoked in this case. It was observed that the appellant had shown 67% abatement on invoices, paid VAT on abated portion, and there were legal decisions supporting exclusion of goods value in service tax calculation. The Tribunal also noted that the issue of contract division for service tax levy was referred to a 5-Member Bench. Considering these factors, the Tribunal concluded that the extended period of limitation could not be applied in this case.

In conclusion, the Tribunal allowed the appeal, finding that the demand for service tax, interest, and penalties could not be sustained on merit or limitation grounds. The appellant's compliance, invoicing practices, and legal arguments supported their position, leading to a favorable decision in the appeal.