2018 (10) TMI 1645 - AT - Service Tax

Construction Services - Construction of Residential Complex Services - contravention of provisions of Rule 6 and 7 of Service Tax Rules, 1994 read with provisions of 67, 68 and 70 of the Finance Act, 1994 - period from June 2005 to January 2010 - Held that - Undisputedly, the works executed or the contracts entered are of composite in nature as it involves supply of materials as well as element of services. The Hon ble apex court in the case of M/s. Larsen & Touboro Ltd, (supra) has held that such contracts which are composite in nature are not leviable to service tax prior to 01.06.2007 - the demand prior to 01.06.2007 cannot sustain and requires to be set aside. Construction of Complex Service - Part of the demand falls after 01.06.2007 - Held that - The Tribunal in the case of M/s. Real Value Promoters Pvt Ltd, 2018 (9) TMI 1149 - CESTAT CHENNAI , had discussed in detail the leviability of service tax on composite contracts under the category of CCS/CICS/ECIS for the period after 01.06.2007. The Tribunal therein had observed that after 01.06.2007, the demand for such composite contracts can attract the levy of service tax under the category of Works Contract Services only. The demand prior to 01.06.2007 or after cannot sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the appellants are liable to pay service tax under Construction of Residential Complex Services for the period from June '05 to January '10.
- Whether the demand for service tax prior to 01.06.2007 can be sustained.
- Whether the demand for service tax after 01.06.2007 under Construction of Complex Service is valid.

Analysis:

1. Issue 1 - Liability for Service Tax under Construction of Residential Complex Services:
The appellants were engaged in providing Construction Services, specifically Construction of Residential Complex Services. The department alleged a contravention of tax rules and issued a show-cause notice for non-payment of service tax from June '05 to January '10. The original authority confirmed the demand, interest, and penalties, leading to the appeal.

2. Issue 2 - Demand Prior to 01.06.2007:
The appellants argued that their activities involved composite contracts with both material supply and service elements, not subject to service tax before 01.06.2007 as per a Supreme Court decision. The tribunal concurred, setting aside the demand before this date.

3. Issue 3 - Demand After 01.06.2007 under Construction of Complex Service:
The tribunal examined the demand for service tax post 01.06.2007 under Construction of Complex Service. Referring to a previous case, it concluded that after this date, composite contracts attract service tax under Works Contract Services, not under Commercial or Industrial Construction Service or Construction of Complex Service. The tribunal emphasized that service tax on composite contracts was introduced only from 01.06.2007, and such contracts were not liable to service tax before this date.

4. Conclusion:
Based on the analysis, the tribunal held that the demand both before and after 01.06.2007 could not be sustained. The appeal was allowed, and the demand was set aside with consequential reliefs. The decision aligned with legal precedents and interpretations of service tax laws regarding composite contracts and the levy of service tax under specific categories.