2019 (9) TMI 1518 - AT - Service Tax

Classification of services - services rendered under the subject contracts by the appellant - work of turnkey contracts on lump sum basis of design, engineering, fabrication, supply and erection, installation, commissioning of Central Air Conditioning plants at the customer s premises - to be classified as works contract under Section 65(105)(zzzza) and hence liable to service tax on and from 01.06.2007 or as erection, commissioning and installation service under Section 65(39a) and taxable under Section 65(105)(zzd) of the Act for the period prior thereto? - HELD THAT - This issue is no more res integra in view of the decision of the Hon ble Supreme Court in COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT . While holding that indivisible works contracts were liable to service tax only on and from 1st June, 2007, whereafter Finance Act 2007 expressly made such contracts liable to service tax and it was held that Works contract were not chargeable to service tax prior to 1.6.2007. Respectfully following the above decision of the Hon ble Supreme Court, which are fully applicable to the instant case, it can be concluded that the services rendered by the appellant under the subject contracts are classifiable as works contract and are not liable to service tax under the Act during the period involved - the demand of tax and interest confirmed by the impugned order and the penalty imposed are unsustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of services as "works contract" or "erection, commissioning and installation services" under the Finance Act, 1994 for the period 01.07.2003 to 31.03.2007.

Analysis:

Issue 1: Classification of Services
The appeal contested the Commissioner's order confirming a service tax demand against the appellant for providing Central Air Conditioning System services. The Commissioner held the services were not "works contract" but "Erection, Commissioning and Installation" under Section 65(39a) of the Finance Act, 1994. The appellant argued that the contracts were "works contract" under Section 65(105)(zzzza) and were outside the purview of service tax for the relevant period. The appellant emphasized that the conditions for a works contract were met, involving the transfer of goods and carrying out erection, commissioning, or installation. They relied on legal precedents to support their position, including decisions from the Supreme Court and the Delhi High Court.

Issue 2: Legal Interpretation
The Tribunal analyzed the legal provisions and previous court decisions to determine the correct classification of the services provided by the appellant. Referring to the Supreme Court's decision in Commissioner of C.Ex. & Cus. Vs. Larsen & Toubro Ltd., it was established that indivisible works contracts were liable to service tax only from 1st June 2007. The Tribunal also cited the Delhi High Court's ruling, which aligned with the Supreme Court's decision, emphasizing that works contracts were not subject to service tax before June 2007. The Tribunal concurred with these decisions, concluding that the services rendered by the appellant were classifiable as works contracts and not liable to service tax for the period in question.

Outcome:
The Tribunal set aside the impugned order, ruling in favor of the appellant and granting consequential relief. The demand for tax, interest, and penalty imposed by the Commissioner was deemed unsustainable based on the legal interpretation and precedents cited. The Tribunal's decision aligned with the established legal position and the arguments presented by the appellant, resulting in a favorable outcome for the appellant in this case.