2016 (1) TMI 393 - AT - Service Tax

Scope of Works Contract Service - extended period of limitation - bonafide belief - demand of service tax on works contract service of construction of pipeline and other structures for providing water supply for Tamil Nadu Water Supply and Drainage Board, in the Ananthapuram Town Panchayat of Villupuram - there was sufficient scope for the appellants to come into a bonafide belief that even during the said period, in absence of clear definition of the Works Contract Service to cover the specific service provided by them, no service tax was payable as the decision of the tribunal in their own case reported in 2008(12) STR 363 was in favour of them. Though this decision pertained to the period prior to 01.06.2007. We also noticed that the appellant had been informing the department of the contracts that they have entered into with various customers. The period involved being immediately after the introduction of Works Contract Service, clarity was required as to whether what was not covered under the erection, commissioning and installation service earlier, could be covered under the new service. Since, in the instant case the issue appears to be latent to the interpretation of law at the initial stage of introducing due service, there was scope of bonafide belief that the appellants did not have to pay tax. Therefore, viewing from this angle, the non obtaining of service tax registration and non payment of tax could be due to the bonafide belief that no tax was payable even under Works Contract Service. Consequently, the appellant s contention that no returns were filed could also be due to such bonafide belief. We do not find that failure of their part in obtaining registration and non payment of tax could be attributed to deliberate suppression of facts and intention to evade tax. Invoking of the longer period of time limit is not justifiable in the instant case, as Sec 80 of the Finance Act, as it existed during the relevant time, would come to the appellant s rescue so far as invoking of the extended period of time limit is concerned. - Demand set aside - Decided in favor of assessee.

Summary

Issues:
1. Demand of service tax on works contract service for construction of pipeline and structures for water supply.
2. Interpretation of Works Contract Service and its applicability to the services provided.
3. Bonafide belief regarding non-payment of service tax.
4. Justifiability of invoking the extended time limit under Sec 80 of the Finance Act.

Analysis:
1. The appeal was filed against the demand of service tax on works contract service for the construction of pipelines and structures for water supply. The appellant contended that the services provided were excluded from the levy as they were for water supply by the TWAD Board and not primarily for commerce or industry. The appellant had paid the demand and penalties under protest, citing a Larger Bench decision supporting their case.

2. The issue revolved around the interpretation of Works Contract Service introduced from 01.06.2007. The Commissioner (Appeals) classified the services under Works Contract Service, but the appellant argued that the service did not fall under erection, commissioning, or installation service. The tribunal noted the distinction between the definitions of the services and the lack of clarity in the law's interpretation. The tribunal found scope for a bonafide belief by the appellant that no service tax was payable during the said period.

3. The tribunal considered the appellant's bonafide belief regarding non-payment of service tax, emphasizing the lack of clear definition under Works Contract Service immediately after its introduction. The tribunal held that the appellant's failure to obtain registration and pay tax could be attributed to a genuine belief that no tax was payable. The tribunal did not find deliberate suppression of facts or intention to evade tax.

4. Regarding the extended time limit under Sec 80 of the Finance Act, the tribunal found that invoking the longer period was not justifiable in the case. Citing relevant judgments, the tribunal set aside the impugned order on limitation and allowed the appeal with consequential relief, considering the appellant's bonafide belief and the lack of clarity in the law's interpretation during the relevant period.