2017 (7) TMI 798 - AT - Service Tax

Works contract - commercial or industrial construction services - whether construction activity undertaken by the appellant prior to 01.06.2007 for construction of quarters for CRPF, office building for HAL, administrative building for BSNL, convention hall for APTDC whether liable to be taxed under commercial or industrial construction services or construction of complex services or otherwise? - Held that - In respect of the construction activities undertaken prior to 01.06.2007, we find that the adjudicating authority has clearly recorded that these construction activities were undertaken by the appellant under EPC contract; there being such a clear finding not contested by revenue as an admitted fact, then in our considered view the same needs to considered on works contract services. Whether post 01.06.2007 the above construction would be taxable under works contract or otherwise? - Held that - Post 01.06.2007, the construction activity undertaken by the appellant for the Government organizations are not taxable, is the claim of the appellant which has been rejected by the adjudicating authority on a finding that appellant had undertaken this activity of construction of quarters as a sub-contractor for Central Public Works Department (CPWD). Whether construction activity undertaken by appellant for private parties is taxable prior to and post 1.6.2007 or otherwise and whether the penalty is imposable on the appellant on the amount of tax not paid in respect of activity undertaken for private parties? - Held that - As regards service tax liability in respect of work of construction executed of various private parties prior and post 01.06.2007, we find that it is the claim of the Ld. Counsel for appellant that they have discharged the service tax liability in toto along with interest; it is also the claim of the appellant that they had not collected any service tax from these private parties prior to 01.06.2007 while the adjudicating authority has recorded a finding that they have collected the tax from private parties. Since it is the claim of the appellant that they have not collected any tax prior to 01.06.2007 and discharged tax liability post 01.06.2007, claims needs to be verified by the lower authorities from the documents that may be produced by the appellant. The question of visiting the appellant with any penalty does not arise even in the case of tax liability in respect of the works executed for private parties. Appeal allowed in part and part matter on remand.

Summary

Issues Involved:
1. Tax liability for construction activities undertaken by the appellant prior to 01.06.2007 for various projects.
2. Taxability of construction activities post 01.06.2007 for different projects.
3. Tax liability for construction activities undertaken by the appellant for private parties prior to and post 01.06.2007 and imposition of penalties.

Analysis:
1. The appellant contested a show cause notice alleging non-payment of service tax for construction services during 2004-05 to 2007-08. The appellant argued that projects like construction of quarters for CRPF, office building for HAL, etc., were not taxable prior to 01.06.2007 as they were works contracts. The adjudicating authority disagreed and imposed demands and penalties. The Tribunal found in favor of the appellant, citing precedents like Larsen & Turbo Ltd., stating that works contract services were not taxable before 01.06.2007. Post 01.06.2007, construction for government organizations was held non-taxable under works contract services.

2. Regarding construction activities for private companies, the appellant claimed to have paid service tax post 01.06.2007 and argued against penalties. The Tribunal remitted the matter to verify if the appellant indeed did not collect tax from private parties pre-01.06.2007. If confirmed, no tax liability exists for services to private parties. The Tribunal emphasized that penalties were not applicable due to compliance with tax payments.

3. The Tribunal's decision was based on legal precedents and a thorough examination of the facts presented. The judgment clarified the tax liabilities for different construction projects undertaken by the appellant, distinguishing between works contracts and taxable services. The Tribunal's order favored the appellant's arguments regarding tax exemptions for certain projects and highlighted the importance of verifying tax payment claims for services to private parties. Penalties were deemed unnecessary in light of the appellant's compliance with tax obligations.