2018 (1) TMI 1583 - AT - Service Tax

Erection, Commissioning Installation Service - non-payment of service tax - extended period of limitation - HELD THAT - The learned Commissioner have erred in holding that service tax is payable in spite of goods/material being used in execution of the contract for Indian Oil, supplied by the assessee-contractor and admittedly VAT- works contract tax have been paid. Accordingly, we find that the classification adopted in the impugned order-‟Erection, Commissioning and Installation Service‟ is not tenable and palpably wrong - thus, the service rendered by the appellant is classifiable under Works Contract Service‟ as defined under Section 65(105)(zzzza). Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against Order-in-Appeal upholding Service Tax demand under Sections 76, 77, and 78 of the Act for construction activity classified as "Erection, Commissioning & Installation Service" - Applicability of Works Contract Service classification - Payment of work contract tax by Indian Oil Corporation Ltd - Interpretation of relevant legal provisions and precedents.

Analysis:
The appellant, engaged in constructing petrol pumps for Indian Oil Corporation Ltd, contested the demand of Service Tax for the period June 2005 to August 2007, categorized under "Erection, Commissioning & Installation Service" under Section 65(39a) of the Finance Act, 1994. The Revenue proposed the demand invoking the extended period of limitation due to non-payment of Service Tax.

The appellant argued that M/s. IOCL deducted work contract tax and made payments after deducting the tax, asserting that the services should not be subjected to Service Tax. Citing the ruling of the Hon'ble Supreme Court in the case of Commissioner of Central Excise v. Larsen & Toubro Ltd., the appellant contended that the services fall under Works Contract Service as materials were used, making the demand under "Erection, Commissioning & Installation Service" incorrect.

After considering the contentions, the Tribunal found that the Commissioner erred in holding the Service Tax payable despite the use of goods/materials supplied by the appellant and the payment of VAT-"works contract" tax. The classification as "Erection, Commissioning & Installation Service" was deemed incorrect, and the service was classified under "Works Contract Service" as per Section 65(105)(zzzza).

Consequently, the impugned order was set aside, and the appeal by the appellant was allowed with consequential benefits in accordance with the law. The Tribunal did not delve into the issue of limitation as the appeal was allowed on its merits.

This judgment clarifies the classification of services under the Works Contract Service category, emphasizing the significance of material usage and tax payments in determining the applicability of Service Tax. The decision underscores the importance of legal interpretations and precedents in resolving taxation disputes effectively.