2017 (9) TMI 1555 - AT - Service Tax

Classification of services - Consulting engineer service or works contract service - C.B.E.C. Circular No.58/7/2003-S.T. dt. 20.05.2003 - Held that - On perusal of this circular, it is seen that the said circular pertains to using a wrong Accounting Code for payment of Service Tax clarification. Since the dispute does not pertain to wrong Accounting Code, the circular is not applicable - in this case nature of contract is admittedly a works contract as is evident from the nature of the contract enclosed with the show cause notice and as has been mentioned in the appeal in the statement of facts. However, where service component is not separately mentioned, the composite works contract cannot be divisible prior to 01.06.2007. Scope of SCN - the allegation in the show cause notice is to classify the impugned service as Consulting Engineer Service - Held that - the contract in this case is a works contract and hence the service provided is works contract service. On that ground too, the show cause notice is not sustainable. Time limitation - Held that - the issue of indivisibility of the works contract prior to 01.06.2007 involved question of interpretation of law - extended period not invoked. Appeal dismissed - decided against Revenue.

Summary

Issues:
- Taxability of services provided by a partnership firm without registration certificate
- Determination of service tax liability on a composite works contract
- Applicability of C.B.E.C. Circulars in the case

Taxability of Services Provided Without Registration Certificate:
The case involved a partnership firm providing taxable services without obtaining a registration certificate and without discharging the Service Tax. The Department issued a show cause notice, and the demand was confirmed by the adjudicating authority with interest and penalty. The matter went through various appeals and remands, leading to the final appeal by the Revenue. The Revenue contended that the services provided fell under the category of 'Consulting Engineer's Services'. However, the Tribunal found that the contract in question was a works contract, not a consulting engineer service, rendering the show cause notice unsustainable on this ground.

Determination of Service Tax Liability on a Composite Works Contract:
The partnership firm was engaged in commissioning and erection of civil and structural works at a refinery on a turnkey basis. The Revenue argued that the entire contract, including various components like civil work, structural work, mechanical work, and instrumentation works, should be considered as a single unit for levy of service tax. The Tribunal, after considering the arguments and judgments provided by the Revenue, held that the contract was a composite works contract of work and service. It further stated that the service tax should be imposed only on the service components flowing from the design charges. The Tribunal emphasized that where the service component is not separately mentioned, the composite works contract cannot be divisible before a certain date, as established by a Supreme Court judgment.

Applicability of C.B.E.C. Circulars:
The Revenue relied on certain C.B.E.C. Circulars to support its arguments. However, the Tribunal observed that the circulars referred to by the Revenue were not directly applicable to the case at hand. It noted that one circular pertained to using a wrong accounting code for payment of Service Tax, which was not the issue in this case. The Tribunal also highlighted that the other circular relied upon by the Revenue was in the context of commissioning and installation services, which did not align with the nature of the contract being a composite works contract. Therefore, the Tribunal dismissed the appeal of the Revenue, finding no merit in their arguments and upholding the decision of the Ld. Commissioner (Appeals) on the issue of limitation and tax liability.