2016 (10) TMI 457 - AT - Service Tax

Jurisdiction to raise the demand of service tax - the construction work carried in Punjab and Himachal Pradesh - The contention of the appellant is that they are registered with the Service Tax Commissioner, Panchkula which has jurisdiction over them and having no jurisdiction over the construction at site. - Held that - The appellant is providing services of construction with material and the amount and the material supplied cannot be vivisected. In that circumstance, the demand pertained to the period prior to 1.6.2007 in view of the decision of the Apex Court in the case of Larsen & Toubro Ltd. (2015 (8) TMI 749 - SUPREME COURT) For the services post 1.6.2007, the appellant is ready to pay service tax on the composite contract value which ,is permissible under the work contract. Therefore, we direct the appellant to make payment of 2% plus other levy in terms of cess payable alongwith interest by the appellant within 30 days from today. On such payment the service tax liability alongwith interest shall be met out. - As the issue involved is interpretation, no penalty is imposable on the appellant. Decided partly in favor of assessee.

Issues:
Demand of service tax under commercial and industrial construction service category; Jurisdictional dispute over construction services in different states; Liability of service tax pre and post 1.6.2007; Interpretation of composite contract value for service tax calculation; Imposition of penalty.

Analysis:

1. Demand of Service Tax under Commercial and Industrial Construction Service Category:
The appeal was filed against an order confirming the demand of service tax under the category of commercial and industrial construction service. The appellant was involved in the construction of residential flats for NTPC employees, leading to a demand of &8377; 17,82,062. Additionally, a demand of &8377; 62,92,468 was raised for construction services provided in Himachal Pradesh and Punjab. The appellant admitted a liability of &8377; 5,63,462, out of which &8377; 4,28,459 had already been paid during adjudication.

2. Jurisdictional Dispute over Construction Services in Different States:
The appellant argued that they were registered with the Service Tax Commissioner in Panchkula, which had jurisdiction over them, and not the construction sites in Punjab and Himachal Pradesh. This jurisdictional dispute led to a demand for service tax which the appellant contested based on the jurisdictional authority of the concerned Commissioner.

3. Liability of Service Tax Pre and Post 1.6.2007:
The appellant contended that they should not be liable to pay service tax prior to 1.6.2007, citing a decision of the Apex Court in Larsen & Toubro Ltd. v. State. They expressed readiness to pay service tax post 1.6.2007 at a rate of 2% on the gross value of services provided under the work contract service. The Tribunal examined the appellant's argument in light of the legal provisions and previous court decisions regarding the determination of service tax liability.

4. Interpretation of Composite Contract Value for Service Tax Calculation:
The Tribunal analyzed the legal framework post-amendment by the Finance Act, 2006, which prescribed a method for determining the service component of a works contract. The judgment referred to specific rules and provisions aimed at segregating the service component from the goods component in a works contract to ensure accurate computation of service tax. The Tribunal emphasized the importance of following the prescribed method to comply with constitutional requirements and avoid including elements related to goods in service tax calculation.

5. Imposition of Penalty:
Considering the issue of interpretation involved in the case, the Tribunal decided not to impose a penalty on the appellant. Instead, they directed the appellant to make a payment of 2% plus other levies on the composite contract value for services provided post 1.6.2007 within 30 days, along with applicable interest. Upon fulfilling this payment, the service tax liability along with interest would be considered settled, and the appeal was disposed of accordingly.

In conclusion, the judgment addressed various complex issues related to service tax liability, jurisdictional disputes, legal interpretations, and penalties, providing a detailed analysis of each aspect before reaching a final decision in favor of the appellant on certain grounds while directing specific payment obligations.

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