2016 (6) TMI 277 - AT - Service Tax

Stay application - Waiver of pre-deposit - Demand of differential Service tax along with interest and penalty - Section 76, 77, & 78 of the Finance Act 1994 - before 01.06.2007, appellant was paying service tax under commercial and residential construction services but with effect from 01.06.2007 they started paying service tax under the category of works contract on the basis of composition scheme in respect of contracts which were entered into prior to 01.06.2007 - Held that - by following the decision of Hon ble Supreme Court in the case of CCE & Kerala vs Larsen Toubro Ltd 2015 (8) TMI 749 - SUPREME COURT , after 01.06.2007, the tax liability has to be discharged under works contract only and no service tax can be charged on construction of commercial and residential services. Therefore, the applicant has a prima facie case for grant of total waiver of pre-deposit. - Waiver granted and recovery stayed

Summary

Issues:
1. Stay application against order confirming service tax demand.
2. Classification of service tax liability under works contract or construction service.
3. Applicability of legal precedents - CCE & Kerala vs Larsen Toubro Ltd and Nagarjuna Construction Co. Ltd Vs UOI.
4. Grant of total waiver of pre-deposit and stay on recovery till appeal disposal.

Analysis:
1. The appellant filed a stay application against the Commissioner of Service tax's order confirming a service tax demand of ?60,85,944 under construction service category with interest and penalty. The appellant, engaged in commercial and residential construction services, transitioned to paying service tax under works contract composition scheme from 01.06.2007 for contracts entered earlier. The Revenue contended the appellant should continue paying under commercial/industrial or residential complex category, issuing a show-cause notice for differential tax, interest, and penalty, confirmed in the impugned order of 28.2.2011.

2. The appellant argued the department's classification post-01.06.2007 was legally untenable, citing the Supreme Court's decision in CCE & Kerala vs Larsen Toubro Ltd, emphasizing tax liability under works contract post-01.06.2007. The Revenue relied on Nagarjuna Construction Co. Ltd Vs UOI decision, upheld by the Supreme Court, stating pre-01.06.2007 composite construction contracts paid tax on 33% value under Notification No. 1/2006 ST, precluding a change in classification. The appellant contended Larsen & Toubro Ltd decision post-dated and clarified the law on works contracts, making it applicable.

3. After considering arguments and legal precedents, the Tribunal found the appellant had a prima facie case for total waiver of pre-deposit. Citing the Larsen & Tubro Ltd decision as clarifying the position on works contracts, the Tribunal granted total waiver in favor of the appellant and stayed recovery pending appeal disposal on merits.