2019 (4) TMI 1914 - AT - Service Tax

Classification of services - Works contract - Composite contract services - activity of civil construction which included supply of material and labour both - C.B.E. C. Circular No. 98/1/2008-S.T., dated 4-1-2008 - HELD THAT - This issue stands decided in favour of the appellant-assessee by Hon ble Supreme Court in Commissioner of Central Excise v. Larsen Toubro 2015 (8) TMI 749 - SUPREME COURT where Hon ble Supreme Court have held that wherever a composite contract includes supply of material the same has necessarily to be classified under the works contract - demand of ₹ 49,70,66,826/- is set aside. Demand of service tax - construction of complex services - activity of construction of flats for Delhi Development Authority under the LIG category - period 2007-08 to 2008-09 - HELD THAT - As clarified by 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 , this activity also is required to be classified under works contract service. Same view also has been taken in the case of SURESH KUMAR BANSAL ANUJ GOYAL ORS. VERSUS UNION OF INDIA ORS. 2016 (6) TMI 192 - DELHI HIGH COURT wherein it was held, the activity of construction of flats by a builder for buyer is not taxable under construction of complex service, and is essentially a works contract - the demand raised is not sustainable, as work includes supply of materials being a composite contract - demand set aside. Revenue demanded service tax on the outstanding receivable by the assessee from their associated enterprise, as on 10-5-2008 - HELD THAT - The said issue is settled in favour of the appellant by co ordinate Bench of this Tribunal in M/S. SIFY TECHNOLOGIES LTD VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, LTU CHENNAI 2015 (3) TMI 964 - CESTAT CHENNAI wherein it has been held that any amendment which increases the tax liability of assessee is necessarily prospective in nature and cannot be applied retrospectively unless the amending Act or notification specifically provides so. Appeal allowed.

Summary

Issues:
1. Classification of service under works contract head.
2. Demand related to construction of flats for Delhi Development Authority.
3. Demand based on the amended Section 67 regarding gross amount charged.

Issue 1 - Classification of service under works contract head:
The appellant-assessee was engaged in civil construction, paying service tax under CICS and CCS classifications. When works contract classification was introduced, they started paying tax under this category. Revenue objected to the change, citing a circular. However, the Hon'ble Supreme Court in Commissioner of Central Excise v. Larsen & Toubro clarified that composite contracts involving material supply must be classified as works contracts. The demand of &8377; 49,70,66,826/- was set aside in favor of the appellant.

Issue 2 - Demand related to construction of flats for Delhi Development Authority:
A demand of &8377; 9,25,912/- was raised for construction of flats under the LIG category. The appellant argued that it was a composite contract with material supply, falling under works contract service as per legal precedents. Referring to the case of Suresh Kumar Bansal and Others, the Tribunal held that the demand was not sustainable as the work included material supply. The demand was set aside.

Issue 3 - Demand based on the amended Section 67:
Revenue demanded service tax on outstanding receivables from associated enterprises as per the amended Section 67. The Tribunal, following the precedent set in Sify Technologies v. CCE & ST, ruled that amendments increasing tax liability are prospective unless specified otherwise. Thus, the demand of &8377; 12,97,38,329/- was set aside, along with interests and penalties. The appeal was allowed with consequential reliefs.

In conclusion, the Tribunal ruled in favor of the appellant on all issues, setting aside the demands and penalties based on the classification of services under works contract head, construction of flats for Delhi Development Authority, and the application of the amended Section 67 regarding gross amount charged. The judgment provided detailed legal analysis and cited relevant legal precedents to support the decisions.