2009 (6) TMI 80 - AT - Service Tax

Construction services in respect of commercial or industrial buildings, and Civil structures benefit of abatement of 67% - Notification No. 1/2006-ST, dated 1-3-2006 - The said abatement stand denied to the appellant on the ground that in respect of the some of their contracts entered into with the buyer, they have availed the Cenvat credit on duty paid on the raw material whereas in terms of proviso to Notification No. 1/2006-ST, the abatement was not available, if the Cenvat Credit has been availed held that - Each and every service of commercial or industrial construction provided by the assessee has to be examined for the purpose of extending the facility in terms of Notification No.01/2006. As explained by the learned advocate, wherever such service is being provided by the appellant, that the raw material of their buyers, the claim of abatement and wherever the raw material is required to be used by them, as per contract, they are availing the Modvat credit stay granted unconditionally

Summary

Issues:
Service tax liability on construction services under the category of "Construction services in respect of commercial or industrial buildings, and Civil structures" - denial of abatement under Notification No. 1/2006-ST due to availing Cenvat credit on duty paid on raw material.

Analysis:
The judgment dealt with the confirmation of Service Tax, interest, and penalty imposed under section 76 of the Finance Act, 1994, amounting to Rs. 60,42,262 on the appellant, a service provider of construction services. The denial of abatement under Notification No. 1/2006-ST was based on the ground that the appellant had availed Cenvat credit on duty paid on raw material for some contracts, making them ineligible for the abatement. The appellant contended that they did not claim abatement where Cenvat credit was availed and vice versa, arguing that each contract should be treated independently for availing benefits. However, the adjudicating authority rejected this argument, stating that conditions must be satisfied for all contracts. The appellant's advocate emphasized that the tax is on services provided, not the provider, and each contract should be assessed separately for compliance with conditions.

The opposing argument highlighted the proviso to the notification, which prohibits abatement if Cenvat credit on input duty has been availed. The adjudicating authority was criticized for not verifying the appellant's records and not providing clear findings on their correctness. The appellate tribunal acknowledged the importance of assessing services for tax liability, not just the provider, agreeing with the appellant's advocate that each service provided should be evaluated independently for abatement eligibility. The tribunal supported the advocate's position that abatement can be claimed for services provided to one buyer even if conditions are not met for services provided to another buyer. The tribunal, therefore, unconditionally allowed the stay petition, indicating a favorable stance towards the appellant's arguments and interpretation of the notification.

In conclusion, the judgment clarified the application of abatement under Notification No. 1/2006-ST concerning construction services and the eligibility criteria based on Cenvat credit availed on raw material. It emphasized the need to assess each service contract independently for compliance with conditions and eligibility for abatement, highlighting the distinction between the tax liability on services provided and the provider. The tribunal's decision to allow the stay petition indicated a supportive approach towards the appellant's contentions and interpretation of the legal provisions.