2016 (12) TMI 600 - AT - Service Tax

Works contract activity - demand of service tax for the period prior to 01.06.2007 - Held that - Works Contract as a species have been included in the statute book for the purposes of levy of service tax with effect from 01.06.2007. The demands raised in the present case are prior to 01.06.2007 and have been made by vivisecting the contracts into various activities comprised therein. The Hon ble Supreme Court in the case of CCE, Kerala Vs. Larsen & Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT has categorically held that Works Contracts involving supply of goods as well as provision of services cannot be subjected to service tax for the period upto 31.05.2007. Since the entire demand in the present case is prior to 01.06.2007, the demand is not sustainable, as has been held in the impugned order - appeal rejected - decided against Revenue-appellant.

Summary

Issues:
1. Classification of contracts as Works Contract or taxable services.
2. Liability to pay service tax on activities executed under the contracts.
3. Applicability of service tax on Works Contracts executed prior to 01.06.2007.

Analysis:
1. The appeal pertains to contracts executed for Bhilai Steel Plant, involving services like designing, erection, commissioning, and technical testing. The Revenue contended that the contracts can be vivisected to identify taxable services separately. The Commissioner (Appeals) held the demand unsustainable, stating the contracts are Works Contracts not subject to service tax. The Revenue argued that activities can be classified into taxable services based on separate invoices and documents, but the Tribunal upheld the impugned order, emphasizing the nature of the contracts as Works Contracts.

2. The respondent argued that the contracts involve both services and supply of goods, falling under Works Contracts. The contracts included various activities like design, civil work, dismantling, and supply of machinery, evident from the contracts submitted. The demand was made by dissecting the contracts, but the Supreme Court precedent stated that Works Contracts pre-01.06.2007 are not liable for service tax if involving both goods and services. As the demand was pre-01.06.2007 and the contracts were Works Contracts, the Tribunal rejected the Revenue's appeal, upholding the impugned order due to the non-applicability of service tax on such contracts before the specified date.

3. Works Contracts were statutorily included for service tax from 01.06.2007. The demands in this case were raised before this date by dissecting the contracts into activities. Citing the Supreme Court's decision, the Tribunal reiterated that Works Contracts involving goods and services are not taxable pre-01.06.2007. As the demand was entirely before this date, the impugned order was upheld, and the Revenue's appeal was dismissed accordingly.