2019 (4) TMI 1805 - AT - Service Tax

Construction of Residential Complex Service - composite contract - benefit of N/N. 12/03-ST dated 20.06.2003, as amended by N/N. 12/04-ST dated 10.09.2004 - benefit denied by the department on the ground that the appellant had availed cenvat credit in respect of the goods sold during the disputed period - HELD THAT - Supply of goods for execution of the construction activity was not in disputed in the case in hand inasmuch as such fact has also been acknowledged in the impugned order dated 31.08.2009. Thus, the construction activity undertaken by the appellant was a composite one, involving both supply/sale of goods and for execution of the assigned task of accomplishing the purpose of the contract. Since by nature, it was a composite contract, the appropriate head of classification of taxable service would be Works Contract Service, leviable to service tax w.e.f. 01.06.2007. The Hon ble Supreme Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT have ruled that irrespective of the classification of service, if any service involves both provision of service and for supply of goods, then the same should be considered as composite service and will be eligible to service tax under the taxable category of Works Contract Service and not otherwise. In view of the well settled position of law that the composite contract, involving both execution of the job and for supply of material for achieving such object, should appropriately be classifiable under Works Contract Service and not under any of the other defined category of service. There are no merits in the impugned order - appeal allowed - decided in favor of appellant.

Summary

Issues: Classification of taxable services under service tax law; Denial of benefit of exemption under Notification No. 12/04-ST; Applicability of Works Contract Service classification.

Classification of Taxable Services:
The appeal challenged the order passed by the Commissioner (Appeals), Service Tax, Ahmedabad, regarding the denial of exemption under Notification No. 12/04-ST. The appellant, engaged in providing taxable services like Commercial and Industrial Construction Service, argued that the services provided should be classified as works contract service rather than Construction of Residential Complex service. The appellant contended that the construction activity undertaken was composite, comprising both service provision and goods supply. The appellant relied on the judgment of the Hon'ble Supreme Court in CCE & Customs, Kerala Vs. Larsen & Toubro Ltd and a decision of the Tribunal in Vistar Construction Pvt. Ltd Vs. CST, New Delhi to support their argument.

Denial of Benefit of Exemption:
The Revenue, represented by the Authorized Representative, supported the findings of the impugned order and argued that the denial of the benefit of abatement under Notification No. 12/04-ST was the core issue. The Revenue emphasized that the taxability of the disputed service under a new category could not be claimed by the appellant at that stage. The Revenue contended that the judgments cited by the appellant were not applicable to the present case.

Applicability of Works Contract Service Classification:
After hearing both sides and reviewing the records, the Tribunal found that the construction activity involved a composite contract, including the supply of goods for execution. The Tribunal determined that the appropriate classification of the taxable service should be Works Contract Service, taxable from 01.06.2007. Citing the Supreme Court's decision in Larsen & Toubro Ltd case and a Tribunal decision in Vistar Construction Pvt. Ltd case, the Tribunal ruled that if a service involves both service provision and goods supply, it should be considered a composite service under Works Contract Service. Therefore, the Tribunal concluded that the impugned order had no merit in classifying the service under a different category and allowed the appeal in favor of the appellant by setting aside the order.

This detailed analysis of the judgment highlights the issues of classification of taxable services, denial of exemption under Notification No. 12/04-ST, and the application of Works Contract Service classification, providing a comprehensive understanding of the legal aspects involved in the case.