2017 (11) TMI 1243 - AT - Service Tax

Classification of services - works contract - Department issued SCN alleging that the services rendered by the appellant will not fall under Erection, Commissioning and Installation service but would fall under Commercial or Industrial Construction service - Held that - From the records it is observed that the contract is composite contract. The period involved is between 10/2005 and 3/2007. The issue whether works contract service is subject to levy of service tax prior to 1.6.2007 is settled by the judgment of the Hon ble Supreme Court in the case of Commissioner Vs. Larsen & Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT , where it was held that Works contract were not chargeable to service tax prior to 1.6.2007 - appeal dismissed - decided against Revenue.

Summary

Issues involved:
Classification of services under Erection, Commissioning and Installation service or Commercial/Industrial Construction service. Applicability of service tax on a composite contract for civil work. Interpretation of relevant circulars and case laws.

Analysis:
1. The dispute in this case revolves around the classification of services provided by the respondents, who were sub-contractors for a company. The department issued a show cause notice alleging that the services rendered did not fall under Erection, Commissioning, and Installation service but under Commercial or Industrial Construction service.

2. The respondents argued that their services should be classified as 'Erection, Commissioning and Installation Services' under section 65(105)(22d) of the Act. They highlighted that they were registered with the department for service tax under this category, and their work was limited to civil erection services for the main contractor. They also emphasized that they were not connected with the customers directly, and bills were raised on the main contractor, who did not avail any service tax credit.

3. The original authority confirmed the demand of service tax based on a Master Circular dated 23.8.2007. However, the Commissioner (Appeals) noted that the contract was composite and that the Master Circular was applicable only from 23.8.2007 onwards. The Commissioner held that the appellant, being a subcontractor, was not liable to pay service tax based on previous decisions.

4. The Tribunal observed that the contract in question was indeed a composite contract, and the period involved was prior to the applicability of the Master Circular. Referring to a Supreme Court judgment and a previous case, the Tribunal concluded that the issue of levy of service tax on works contracts was settled, and in similar matters, demands had been set aside based on the Supreme Court's decision.

5. Therefore, the Tribunal upheld the decision of the Commissioner (Appeals) and dismissed the appeal filed by the department, finding no fault in the order passed. The judgment was pronounced in open court, affirming the non-liability of the subcontractor for service tax in this case.