2016 (9) TMI 376 - AT - Service Tax

Invokation of extended period of limitation - Demand alongwith interest and penalties - denial of benefit of Notification No. 1/2006 which allowed abatement of 67% - Completion and finishing services of civil structure - period involved is March, 2006 to September, 2007 - availed cenvat credit and have also received free supplied items from their clients - Held that - in terms of Sl.No.7 of notification, abatement benefit is not available to the completion and finishing services . However, we note that appellant had taken categorical stand before the lower authorities that work was being done by them under work contract and also filed an affidavit to the effect that no free supplied items were being received by them from their client. We find that in terms of the latest decision of the Hon ble Supreme Court in the case of CCE, Kerala vs. Larsen & Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT , the work contract were not liable to service tax prior to 1.6.2007. As such, it requires to be examined as to whether the appellants activities of providing completion and finishing services would fall under the category of works contract or not. If the services were being provided under a work contract, then no liability to service tax would arise for the period prior to 1.6.2007. If there was no service tax liability, even though, the appellant had discharged Service tax on 33% of the value of services, the demand for differential duty cannot be confirmed on the said ground. Therefore, the impugned order is set aside and matter is remanded back to the adjudicating authority for examining the applicability of Supreme Court decision in the case of Larsen & Toubro Ltd. (supra) and to decide the demand issue accordingly. We keep the issue of limitation open for the adjudicating authority to re-decide in the light of appellants submissions that they were filing regular returns and were discharging the service tax liability. As such, there was no malafide or suppression on their part so as to invoke the extended period of limitation. - Matter remanded back

Summary

Issues Involved:
Interpretation of notification allowing abatement of service tax, applicability of abatement to completion and finishing services, consideration of work contract exemption, liability for service tax prior to a specific date, demand for differential duty, examination of Supreme Court decision, determination of limitation period.

Analysis:
1. The case involved a dispute regarding the availability of abatement of service tax to an appellant engaged in providing "completion and finishing services" of civil structures during the period from March 2006 to September 2007. The revenue contended that the appellant was not entitled to the abatement due to availing cenvat credit and receiving free supplied items from clients, leading to the initiation of proceedings against them.

2. The adjudicating authority confirmed a demand of ?12,18,362 along with interest and penalties, citing that the notification providing abatement was not applicable to "completion and finishing services" as per the relevant provision.

3. The appellate tribunal considered the appellant's claim that the services were provided under a work contract and that no free supplied items were received. Referring to a Supreme Court decision, it was noted that work contracts were not liable to service tax before June 1, 2007. Therefore, the tribunal directed a re-examination of whether the appellant's activities fell under the category of works contract, which would impact the liability for service tax before the specified date.

4. It was emphasized that if there was no service tax liability due to the nature of the services provided, the demand for differential duty could not be upheld. The tribunal set aside the previous order and remanded the matter to the adjudicating authority to assess the applicability of the Supreme Court decision and determine the demand issue accordingly.

5. The issue of limitation was left open for the adjudicating authority to reconsider in light of the appellant's compliance with regular returns and service tax payments, indicating no malafide intent or suppression. The tribunal clarified that it had not examined the merits or limitation issue in detail, allowing the appellant to raise any relevant points during the fresh proceedings.

6. In conclusion, the tribunal highlighted that the appellant was free to present any additional issues before the adjudicating authority during the de novo proceedings, emphasizing a fair and comprehensive reassessment of the case.