2017 (4) TMI 1181 - AT - Service Tax

Construction of civil structures as the Park Villa - classified under the head Works Contract Service or Industrial Commercial Construction - Held that - the nature of the activities carried out by appellant was civil construction. As work contract was not liable to tax prior to 1.6.2007, there shall not be taxability on this aspect of the adjudication - once there is no liability on works contract, therefore there shall be no penalty. Repair and Maintenance activity - Held that - for no agitation against that by appellant, there shall be demand of service tax on that count. Penalty on repair and maintenance service - Held that - there is contract between the appellant and the residents that soon after residents association is formed, the deposits shall be transferred to the association, If realization of above has gone to the association, appellant shall not be liable to penalty - On the aforesaid limited issue, appeal is remanded to the Adjudicating Authority. Appeal disposed off - part matter allowed and part matter on remand.

Summary

Issues:
1. Nature of activity - Works Contract Service vs. Industrial Commercial Construction
2. Taxability of works contract carried out before 1.6.2007
3. Tax liability on Repair and Maintenance Service
4. Imposition of penalty on Repair and Maintenance Service

Analysis:
1. The appellant contested two demands - one related to Works Contract Service mislabeled as Industrial Commercial Construction and the other to Maintenance and Repair Service. The appellant accepted the liability for Repair and Maintenance Service.

2. The appellant argued that construction of civil structures, like Park Villa, conducted before 1.6.2007, should not be taxed based on the Supreme Court's ruling in CCE & CC Vs Larsen and Toubro Ltd. 2015. The Tribunal agreed that pre-1.6.2007 works contracts were not taxable, thus dismissing the taxability allegation.

3. The Revenue maintained that the appellant already paid the tax and the adjudication was proper. The Tribunal, following the Apex court's decision, ruled that as works contracts were not taxable before 1.6.2007, there should be no tax liability or penalty on this aspect.

4. Regarding the Repair and Maintenance activity, the Tribunal acknowledged the tax demand since the appellant did not contest it. However, the issue of penalty was remanded to the Adjudicating Authority for further examination. The Authority was instructed to review the records and evidence related to the transfer of deposits to the residents' association to determine if penalties were warranted.

5. The Tribunal clarified that any penalty imposed should be under section 78 of the Finance Act, not section 76. To maintain public confidence, the Authority was directed to complete the proceedings by 30.6.2017 and order refunds promptly if applicable. This decision aimed to ensure fairness and compliance with the law.