2016 (10) TMI 621 - AT - Service Tax

Demand of service tax for the period 10.09.2004 to 24.03.2008 and also 1.4.2008 to 15.10.2011 - invocation of extended period of limitation - demand of interest and penalty 78 of the Finance Act, 1994 - classification of services - Commercial or Industrial Construction (CIC) Service falling under Section 65 (105) (zzq) or Works Contract Service falling under Section 65 (105) (zzzza) - Held that - all the contracts are in the nature of works contracts and no demand of service tax can be upheld for such works for the period prior to 01.06.2007. For the period subsequent to 01.06.2007, the Department does not have any option other than to classify the services rendered by the appellant under Works Contract Service. The decision in the case of Commissioner of Central Excise, Kerala, vs. L & T Ltd. 2015 (8) TMI 749 - SUPREME COURT relied upon. Likewise, such services for the period upto 31.5.2007 cannot also be classified under any service and cannot be charged to Service Tax. Hence, the matter needs to be remanded back to the Commissioner for passing denovo orders. The demand up to 31.05.2007 does not survive. However, for the period from 01.06.2007, the lower authority directed to re-examine the issue by going through the relevant contracts and other documents in the light of the L & T case and pass revised orders. For the period from 01.06.2007 - the first SCN was issued on 26.5.2009 invoking the extended period of limitation. The Department is precluded from issuing another SCN invoking the extended period. Consequently we make it clear that the demand raised in the second SCN dated 19.4.2011 does not survive even in the denovo proceedings beyond the normal time limit under Section 73 of the F.A 1994. Appeal allowed - matter remanded.

Summary

Issues:
1. Classification of construction activities for service tax liability.
2. Demands raised in show cause notices for service tax.
3. Applicability of abatements under specific notifications.
4. Validity of issuing multiple show cause notices on the same issue.
5. Interpretation of legal judgments on works contract services.

Analysis:
1. The appeals were against Orders in Original passed by the Commissioner regarding service tax liability on construction activities of a Central Public Sector Enterprise. The Revenue contended that the activities fell under Commercial or Industrial Construction Service (CIC). The Commissioner confirmed the demands of service tax, interest, and penalty, disallowing abatements claimed by the appellant. The appellant argued their activities should be classified under Works Contract Service post-01.06.2007, but the Commissioner disagreed, classifying them under CIC.

2. The appellant challenged the orders on various grounds, citing the Supreme Court's decision that composite contracts should be classified only under Works Contract Service post-01.06.2007. They also argued for abatements under specific notifications and questioned the validity of issuing multiple show cause notices on the same issue. The Tribunal noted the demands covered both pre-01.06.2007 and post-01.06.2007 periods, emphasizing the need to classify services correctly based on legal precedents.

3. The Tribunal observed that all contracts in question were works contracts, following the Supreme Court's ruling. For the period prior to 01.06.2007, no service tax liability could be imposed as works contract service was not recognized. Post-01.06.2007, the classification should be under Works Contract Service. The matter was remanded to the Commissioner for re-assessment in line with the Supreme Court's decision, with the demand up to 31.05.2007 deemed invalid.

4. The Tribunal highlighted that the Department could not issue another show cause notice invoking the extended period of limitation after the first notice, citing legal precedent. The demand in the second notice did not survive beyond the normal time limit under the Finance Act, 1994. Therefore, the impugned orders were set aside, and the appeals were allowed by way of remand for re-assessment.

This detailed analysis of the judgment addresses the classification of construction activities for service tax, demands raised in show cause notices, abatements under specific notifications, validity of multiple show cause notices, and the interpretation of legal judgments on works contract services, providing a comprehensive overview of the case and its implications.