2017 (9) TMI 1383 - AT - Service Tax

Classification of services - Site Formation Services or works contract services? - services rendered involves activities which include excavation, earth moving and demolition services, earth cutting, scaffold winch foundation, drilling and lining of return airshaft, works are executed on the basis of work orders received by the appellant mostly from collieries - Held that - the contracts involved not only various services, but also includes the supply of the associated material. Consequently, such contracts fall under the category of Works Contract Service - The Hon ble Supreme Court in the case of Larsen & Toubro 2015 (8) TMI 749 - SUPREME COURT held that any contract which involves transfer of property in the goods along with rendering of services, will have to be necessarily classified under Works Contract Services, will have to be necessarily classified under Works Contract Service w.e.f. 01.06.2007, such contracts cannot be classified under any other category for the period prior to 01.06.2007. The benefit of the above decision of Apex Court was not available to the adjudicating authority at the time of passing of the impugned order - it is necessary to set aside the impugned order and remand the matter to the adjudicating authority for de novo decision - appeal allowed by way of remand.

Summary

Issues:
Classification of services under Works Contract Services (WCS) or Site Formation Services, applicability of Works Contract Composition Scheme, and determination of Service Tax liability.

Analysis:
The appeal challenged an Order confirming a Service Tax demand for a specified period, classifying the services under the category of Site Formation Services. The appellant argued that the services rendered fell under Works Contract Services due to activities like excavation, earth moving, and demolition services, involving transfer of property in goods. Reference was made to the Supreme Court's decision in a similar case pre-2007 and subsequent compliance with Works Contract Composition scheme post-2007.

The appellant contended that the services provided were composite in nature, involving various activities specified under WCS, contrary to the adjudicating authority's classification. The Tribunal noted the complexity of the work orders executed by the appellant for coal mines, involving excavation, concrete fabrication, and erection for mining, which aligned with WCS activities. However, the authority emphasized the lack of evidence of property transfer in goods or compliance with Composition Scheme conditions.

Upon review of the contracts and considering the Supreme Court's precedent, the Tribunal held that contracts involving property transfer in goods and services must be classified under Works Contract Services post-2007, with no alternative classification for the pre-2007 period. Due to the authority's oversight of this precedent, the impugned order was set aside, and the matter remanded for reevaluation. Each contract was to be individually examined for WCS classification, and compliance with Composition Scheme conditions was to be verified.

The Tribunal directed the authority to allow additional evidence, provide a fair opportunity for the appellant to present their case, and keep all issues open for consideration during the de novo decision process. Ultimately, the appeal was allowed for remand, emphasizing the need for a thorough reevaluation based on the clarified legal principles.

This judgment highlights the significance of proper classification under relevant tax schemes, adherence to legal precedents, and the necessity for meticulous evaluation in determining Service Tax liability for complex service contracts.