2016 (10) TMI 620 - AT - Service Tax

Classification of service - commercial or industrial construction service or works contract service - works contract service wef 1/6/2007 - denial of the benefit of N/N. 12/2003-ST dated 20/6/2003 and benefits of Rule 2A of the Service Tax Determination of Valuation Rules 2006 - The appellant was paying service tax prior to the introduction of Works Contract Service WCS (w.e.f. 01/6/2007) under Commercial or Industrial Construction Service. After the introduction of the works contract service they have sought re-classification of their service under the newly introduced WCS - Held that - the decision in the case of Commissioner of Central Excise, Kerala, vs. L & T Ltd. 2015 (8) TMI 749 - SUPREME COURT relied upon where it was held that such contracts should be classified only under works contract scheme w.e.f. 01/6/07. Further questions which arise are (i) whether the appellant will be entitled to the benefit of composite scheme and (ii) whether they will be entitled to exclude the value of goods supplied under Rule 2A of the Service Tax Determination of Valuation Rules - this issue stands decided in the case of Ahluwalia Contracts (I) Ltd. vs CCE, Noida 2015 (7) TMI 855 - CESTAT NEW DELHI where it is held that the issue is not res integra and this case relied upon. They will be entitled to re-classify their services under Works Contract Scheme 01/6/07. They will also be entitled to the benefit of Rule 2A of the Service Tax Determination of Valuation Rules. The issue needs to be remanded back to the original Adjudicating Authority for evaluating the claim of the appellant to the quantum of the benefit entitled to them under Valuation Rule 2A of the Service Tax Determination of Valuation Rules - matter remanded to adjudicating authority - appeal allowed.

Summary

Issues:
1. Classification of service from Commercial or Industrial Construction Services (CIC) to Works Contract Service (WCS) from 01/6/07.
2. Entitlement to benefits under Rule 2A of the Service Tax Determination of Valuation Rules.
3. Applicability of Composition Scheme under Rule 3(3) of the Works Contract (composition scheme for payment of service tax) Rules, 2007.

Analysis:
1. The appellant, engaged in construction services, sought to reclassify their service under Works Contract Service (WCS) from 01/6/07, transitioning from Commercial or Industrial Construction Services (CIC). The Department contended that the reclassification was improper due to ongoing works contracts and the application of the Composition Scheme. The impugned order demanded service tax under CIC for June 2007 to March 2008, denying benefits under specific notifications and valuation rules.

2. The appellant challenged the order citing the Supreme Court's decision in the Larsen & Toubro case, supporting the reclassification to WCS from 01/6/07 for composite contracts. They referenced the Ahluwalia Contracts case and the High Court's affirmation, arguing for the application of Rule 2A of the Valuation Rules. The Tribunal considered the nature of the contracts, affirming the reclassification to WCS from 01/6/07 and the entitlement to Rule 2A benefits, aligning with the Ahluwalia Contracts case.

3. The Tribunal concurred with the appellant's entitlement to reclassify under WCS and Rule 2A benefits from 01/6/07, excluding the Composition Scheme due to Rule 3(3) restrictions. The matter was remanded to the Adjudicating Authority for evaluating the appellant's claim under Rule 2A, directing the production of necessary documentation for a fresh decision. The appeal was allowed by way of remand, ensuring a comprehensive review of the benefit claim under the Valuation Rules.