2016 (10) TMI 772 - AT - Service Tax

Taxability - composite services - classification of services - job of transportation of storage tank and other material, loading and unloading work, excavation of earth and other hard rocks and civil work of excavation brick masonry, etc. and installation of tanks and mono pumps etc. - classified under the head erection, commissioning and installation services falling u/s 65 (39a) or under the head of Works contract service? - Held that - The classification of the composite services which involve supply of goods as well as rendering of services has been decided by the Apex Court in the case of Commissioner of Central Excise, Kerala vs Larsen & Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT . It was held that any contract which is of composite nature involving supply of goods and rendering of services, has to be necessarily classified under work contract with effect from 1.6.2007 the date on which the work contract service was introduced in the statute. The Apex Court further held that for the period prior to this date, such composite contract cannot be charged to service tax under any other services also. The right classification for the services rendered would be work contract services with effect from 1.6.2007. Consequently for the period upto 31.5.07, no demand of service tax survives in the present case. For the period with effect from 1.6.2007 services will be classifiable under works contract services - appeal disposed off - matter remanded to the original adjudicating authority to re-decide the matter in the light of the nature of service and the pronouncement of law by Apex Court in the Larsen and Toubro case.

Summary

Issues:
Classification of services as erection, commissioning, or installation services versus work contract services for the period February 2004 to January 2008.

Analysis:
The appeal concerns a dispute over the classification of services provided by the assessee to M/s. Hindustan Petroleum Corpn. Ltd. (HPCL) from February 2004 to January 2008. The Revenue contended that the services fell under erection, commissioning, or installation services, while the Commissioner (Appeals) determined them to be work contract services introduced in the statute from 1.6.2007. The Revenue challenged the Commissioner's order, leading to the present appeal.

The Revenue argued that the services rendered by the assessee, including the installation, alterations, or repair of Petrol pumps for HPCL, should be classified as erection, commissioning, or installation services. They sought the reinstatement of the original order demanding service tax from the assessee.

Upon hearing arguments, the Tribunal noted that the nature of work undertaken by the assessee for HPCL involved various activities such as transportation of goods, loading and unloading work, excavation, brick masonry, installation of tanks, and mono pumps. The Commissioner (Appeals) determined that the contract between HPCL and the assessee was composite, involving both the supply of material and services. Citing the decision in Commissioner of Central Excise, Kerala vs Larsen & Toubro Ltd., the Tribunal emphasized that a composite contract with both goods supply and service provision must be classified as work contract services from 1.6.2007.

Based on the above analysis, the Tribunal concluded that for the period up to 31.5.2007, no service tax demand was applicable, as the services provided were correctly classified as work contract services starting from 1.6.2007. The matter was remanded to the original adjudicating authority for reconsideration in line with the legal pronouncement by the Apex Court in the Larsen and Toubro case.

In the final order, the Tribunal set aside the Commissioner (Appeals) decision and remanded the matter for further consideration, emphasizing the correct classification of services as work contract services from 1.6.2007 onwards and the absence of service tax demand for the period before this date.