2017 (10) TMI 1613 - AT - Service Tax

Eligibility for abatement under Notification No. 15/2004-ST dated 10/09/2004 and No. 1/2006-ST dated 01/03/2006 - civil as well as interior fit out work - demand of the service tax on the ground that value of free supply items is includable in the gross value for the purpose of abatement - HELD THAT - The activities undertaken by the appellant involves both supply of material as well as provision of labour. The appellant had raised the invoice on its contractees showing payment of VAT and such VAT payment particulars were duly reflected in the periodic VAT returns filed before the Jurisdictional VAT authorities. Since the activities undertaken by the appellant is composite in nature, involving both supply of materials as well as execution of assigned tasks, the said services should fall under the purview of Works Contract Service and will not be excisable to service tax prior to 01/06/2007 as per the judgment of 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 . Even for the period from 01/06/2007, the said service will not be subject to levy of service tax under CICS, since admittedly the activities undertaken falls under the Works Contract Service - Tribunal in the case of M/S. URC CONSTRUCTION (P) LTD. VERSUS COMMISSIONER OF CENTRAL, SALEM 2017 (1) TMI 1363 - CESTAT CHENNAI has set aside the demand for the period from 01/06/2007 on the ground that composite nature of service should not be classified under CICS service. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of service for tax purposes - Works Contract Service or Commercial or Industrial Construction Service (CICS)

Analysis:
The appellant, a civil contractor undertaking civil and interior fit-out work for hotels, was challenged by the Department regarding the eligibility for abatement under specific notifications. The Department argued that the services provided were completion and finishing services, not qualifying for abatement. The appellant contended that the activities were composite, involving both material supply and labor provision, thus not liable for service tax under CICS until 31/05/2007. The appellant cited the Supreme Court judgment in CCE & CUS, Kerala vs. Larsen & Toubro Ltd. to support this argument. For the period after 01/06/2007, the appellant relied on the same Supreme Court judgment and a decision by the Tribunal in another case to contest the demand on composite contracts under CICS. The Revenue, however, claimed that the appellant's work only involved labor supply without material transfer, falling under CICS, not Works Contract Service.

Upon hearing both sides and reviewing the case records, the Tribunal found that the appellant's activities included both material supply and labor provision. The appellant invoiced contractees for VAT payments, which were reflected in VAT returns filed with authorities, indicating the composite nature of the services. Consequently, the Tribunal ruled that the services should be classified under Works Contract Service and not subject to service tax before 01/06/2007, aligning with the Larsen & Toubro Ltd. Supreme Court judgment. Even post 01/06/2007, the services were deemed not taxable under CICS as they fell under Works Contract Service. Citing the precedent set by the Tribunal in another case, the demand for the period after 01/06/2007 was also set aside due to the composite nature of the service not fitting under CICS.

In conclusion, the Tribunal found no merit in the impugned order and allowed the appeal in favor of the appellant, setting aside the previous decision.