2020 (2) TMI 1396 - AT - Service Tax

Commercial or Industrial Construction Service - composite contract wherein construction has been made by the appellant for Government organizations - period prior to 01.06.2007 - Construction for Indian Navy, being flats construction for their personnel (MAP) - Demand as regards construction to Seawood apartments - Penalties. Commercial or Industrial Construction Service - composite contract wherein construction has been made by the appellant for Government organizations - period prior to 01.06.2007 - HELD THAT - This issue is settled in favour of the appellant as the Hon ble Supreme Court in COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT has held that a composite contract is works contract service w.e.f. 01/06/2007 - also, there is no proposal by the Revenue to classify the said activity under Works Contract Service. Thus, prior to 01.06.2007, the activity is not taxable. Construction for Indian Navy, being flats construction for their personnel (MAP) - HELD THAT - As such flats / apartments were not made for sale and construction is for one principal (the Ministry of Defence), the same is held to be not taxable in view of the law as clarified by the Board vide Instructions F.No.137/12/2006-CX.4 dt. 29/01/2009 (Circular No.108/2/2009- ST). Demand as regards construction to Seawood apartments - HELD THAT - The appellant is not entitled for the 67% abatement under the said notification. However, the appellant is entitled to deduction of material component actually used by them in construction of the projects - Seawood Apartment. Appellant have also submitted that they are registered under the provisions of State VAT and they have maintained proper accounts of the material used in the project - Accordingly, this issue is remanded to the file of the original adjudicating authority to allow abatement or deduction of actual quantity/amount of material used in the construction, as per the records of the appellant. Appellant is also directed to produce the calculation of such material used by them along with the Chartered Accountant certificate and shall also produce other relevant records like VAT assessment order, etc. as required for proper determination - matter remanded only for the purpose of requantification of service tax in respect of Seawood Apartment only. Penalties - HELD THAT - All penalties are accordingly set aside. Appeal allowed in part and part matter on remand.

Summary

Issues involved:
1. Taxability of construction services under 'Commercial or Industrial Construction Service' for the period prior to 01.06.2007 in case of a composite contract.
2. Taxability of construction services under 'Construction of Complex Service' for a specific amount.
3. Taxability of construction services for Indian Navy personnel flats construction.
4. Taxability of construction services for Seawood apartments and abatement of material component under specific notifications.

Analysis:

1. The first issue pertains to the taxability of construction services under 'Commercial or Industrial Construction Service' for a composite contract before 01.06.2007. The Tribunal held that the demand for this period is not valid as a composite contract is considered works contract service w.e.f. 01/06/2007 as per a Supreme Court ruling. The Revenue did not propose to classify the activity under Works Contract Service before this date, hence the activity is not taxable.

2. The second issue involves a demand under 'Construction of Complex Service.' The Tribunal ruled in favor of the appellant based on a Supreme Court decision, stating that a composite contract is works contract service from 01/06/2007. The activity is not taxable before this date, and no proposal was made by the Revenue to classify it under Works Contract Service. Thus, the demand was settled in favor of the appellant.

3. Regarding the construction of flats for Indian Navy personnel, the Tribunal found it non-taxable as per instructions from the Board and Circular No.108/2/2009-ST since the construction was not for sale and was for a single principal, the Ministry of Defence.

4. The final issue concerns the construction of Seawood apartments and the abatement of the material component under specific notifications. The Tribunal noted that the appellant was not entitled to a 67% abatement as they did not supply all the materials involved in the construction. However, the appellant was entitled to a deduction for the material actually used in the project. The matter was remanded to the original adjudicating authority for a proper determination based on records provided by the appellant, including a Chartered Accountant certificate and relevant documents like VAT assessment orders. The appeal was allowed in part, penalties were set aside, and the case was remanded for the purpose of requantification of service tax for Seawood Apartment only.