2017 (9) TMI 94 - AT - Service Tax

Works contract service - composite contracts - natural justice - Held that - Undoubtedly commercial or industrial construction service and erection, commissioning or installation service are amenable to coverage within the definition of works contract service if goods are sold along with the providing of service. To the extent that the said contracts are composite, tax liability would arise only after 1st June 2007 and prior to that even if these services existed prior to that date - It would appear that the appellant has not been able to substantiate that the consideration was not limited to the service itself. In view of the strenuous argument put forth before all authorities, it would be inequitable if an opportunity to produce such evidence is not afforded to appellant. It is necessary that each of contracts be scrutinized to ascertain if they are composite or otherwise for application of the tax levy - appeal allowed by way of remand.

Summary

Issues:
- Appeal against order confirming demand of tax for various services
- Tax liability on composite contracts
- Inclusion of tangible goods service and management, maintenance, or repair service in works contract service
- Consideration of evidence regarding goods sold along with services
- Tax liability for commercial or industrial construction service and erection, commissioning, or installation service on composite contracts
- Lack of elaborate discussion and consideration of Supreme Court decision in lower authorities' order
- Remand for redetermination of tax liability

Analysis:

The appeal challenges the order confirming a tax demand for services provided from 1st June 2005 to 31st March 200?. The appellant argues that their contracts are composite and subject to tax under the works contract service introduced in 2007. Citing a Supreme Court decision, the appellant contests the splitting of composite contracts before the new taxable service's introduction.

The tribunal notes the appellant's claim regarding tangible goods supplied and the lack of control over their operation. It emphasizes that works contract service does not encompass supply of tangible goods or management, maintenance, or repair services, even if goods are supplied with services. The authorities did not consider evidence regarding goods sold with services, necessitating an opportunity for the appellant to provide such evidence.

While commercial or industrial construction service and erection, commissioning, or installation service can be taxed under works contract service for composite contracts, tax liability arises only post-2007. The tribunal directs a reevaluation of each contract to determine if they are composite, as per the Supreme Court decision. The matter is remanded to the original authority for reassessment of tax liability and related consequences in line with the Finance Act, 1994.

The tribunal highlights the lower authorities' lack of detailed discussion and consideration of the Supreme Court decision, necessitating a thorough scrutiny of each contract to apply the tax levy correctly. The original authority is tasked with reevaluating the contracts, giving due regard to the appellant's contentions and evidence regarding the other services in question.