2017 (9) TMI 1192 - AT - Service Tax

Valuation - Construction of Complex Service - supply of goods as well as supply of service - Held that - As the contract is composite in nature with the supply of goods and provision of service and has been executed prior to 01.06.2007, the same is not liable to Service Tax during the material period - demand set aside - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Appeal against the order of Commissioner, Service Tax, Delhi regarding Service Tax demand for construction activities.
2. Dispute over taxable value considered by the original authority.
3. Applicability of Service Tax on a works contract executed before 01.06.2007.

Analysis:
1. The case involved an appeal by both the Revenue and the assessee against an order demanding Service Tax for construction activities categorized as "construction of Complex Service" under Section 65 (105) (zzzh) of the Finance Act, 1994. The original authority confirmed a Service Tax demand for a specific period along with penalties.

2. The Revenue contended that the taxable value considered by the original authority was incorrect, highlighting that the income realized in previous years under the mercantile system should not automatically be considered income for a particular year. Additionally, the Revenue argued that deductions for amounts paid to subcontractors were not properly accounted for, citing Section 67 provisions to challenge the tax liability calculation.

3. The appellant-assessee argued that their contract involved both goods subject to VAT and services, constituting a works contract. They presented a certificate from the service recipient detailing the contract, duration, and other specifics. The appellant asserted that as the contract was completed before 01.06.2007 and fell under the category of "works contract service" introduced in the Finance Act, 1994 post that date, Service Tax was not applicable during the relevant period. Relying on a Supreme Court decision, the appellant sought to overturn the demand confirmed in the impugned order.

4. After considering the arguments and the nature of the contract, the Tribunal found that as the contract was composite in nature involving both goods and services and was executed before 01.06.2007, Service Tax was not applicable during the material period. Citing a Supreme Court judgment, the Tribunal ruled in favor of the appellant-assessee, setting aside the impugned order and allowing the appeal.

5. Consequently, the Tribunal dismissed the appeal filed by the Revenue based on the above analysis, emphasizing the non-applicability of Service Tax to the appellant's contract executed before the specific tax entry for "works contract service" was introduced in the Finance Act, 1994.