2017 (9) TMI 1379 - AT - Service Tax

Erection, Commissioning and Installation Services - It appeared that the work entrusted and executed involved complete supply of required materials and carrying out the installation of materials, testing and commissioning - Held that - it clearly emerges that even the department has considered the activity carried out by the respondents as being in the nature of Works Contract - the Hon ble Apex Court Commissioner of Central Excise & Customs, Kerala Vs Larsen & Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT has clarified that such services which are in the nature of Works Contract carried out, as is the case here, cannot be exigible to tax till such service was brought under the tax net with effect from 01.07.2006 - appeal dismissed - decided against Revenue.

Summary

Issues:
Interpretation of service tax liability under "Erection, Commissioning and Installation Services" (ECIS) for the period 01.07.2003 to 31.03.2006.

Analysis:
The case involved a dispute regarding the service tax liability of the respondents for providing 'design and engineering drawing' services to set up 'Cathodic Protection System' for long-distance pipelines. The department contended that these services fell under the category of "Erection, Commissioning and Installation Services" (ECIS) and initiated proceedings to demand service tax for the period from 01.07.2003 to 31.03.2006. The original authority confirmed the tax liability along with penalties, but the Commissioner (Appeals) overturned this decision, stating that the term 'installation' referred to putting in place pre-existing machinery or plant, which did not apply to the respondents' case.

On appeal to the Appellate Tribunal, the department argued that all items necessary for the 'Corrosion Protection System' would be considered 'equipments' and thus covered under ECIS from 01.07.2003. However, the respondent's representative relied on a Supreme Court judgment to assert that the activity constituted a Works Contract and would not be taxable until 01.07.2006. The department contested this, claiming that the Supreme Court judgment only applied to indivisible contracts, not applicable in this scenario due to available details of labor charges.

After hearing both sides, the Tribunal analyzed the nature of the services provided by the respondents and the relevant legal provisions. Referring to the Supreme Court's judgment in Commissioner of Central Excise & Customs, Kerala Vs Larsen & Toubro Ltd., the Tribunal highlighted that services akin to Works Contracts, as in this case, were not taxable until 01.07.2006. The judgment emphasized the distinction between service contracts and composite works contracts, clarifying that the latter were not subject to service tax until specific amendments were made to include them. The Tribunal concluded that the services provided by the respondents fell under the category of Works Contract and were not taxable during the period in question. Therefore, the appeal by the Revenue was dismissed.

In summary, the judgment delved into the interpretation of service tax liability under ECIS for the specified period, analyzing the nature of the services provided by the respondents and applying the legal principles outlined in the Supreme Court's judgment to determine the taxability of the services as Works Contracts. The Tribunal's decision to dismiss the appeal rested on the understanding that the services in question did not fall under the taxable category until legislative changes explicitly brought them under the tax net.