2017 (12) TMI 172 - AT - Service Tax

Classification of services - Residential Complex service - Commercial or Industrial Construction services - extended period of limitation - it was alleged that the construction of building for SBI and Shrama Vikram Motors falls under category of Commercial or Industrial Construction Services under Section 65 (25b) of the Finance Act, 1994 and construction of Residential Complex is under Section 65 (91a) of the Act - whether the construction services provided along with material, falls under the Works Contract service or construction of Commercial or Industrial Construction Services / Residential Complex services? Held that - the Works Contract means, transfer of property including such contract as sale of goods and such contract involve the purpose of carrying out various construction services. Admittedly, in the case in hand, the appellant has constructed Residential Complex and other construction services along with material which has not been disputed. Therefore, the proper classification of the activity undertaken by the appellant is more appropriately falls under Works Contract service and the same has not been alleged against the appellant in the show cause notice issued to the appellant. Extended period of limitation - the show cause notice has been issued by invoking extended period of limitation on the ground that, as the appellant has sought information through RTI applications whether their activity is liable to be taxed or not and the same has been replied by the different Commissionerates as well as service recipients that their activity is not liable to be taxed under Finance Act, 1994 - Held that - reliance placed in the case of M/s. UNIWORTH TEXTILES LTD. Versus COMMISSIONER OF CENTRAL EXCISE. RAIPUR 2013 (1) TMI 616 - SUPREME COURT , where it was held that on account of the fact that the burden of proof of proving mala fide conduct under the proviso to Section 28 lies with the Revenue; that in furtherance of the same, no specific averments find a mention in the show cause notice which is a mandatory requirement for commencement of action under the said proviso, and that nothing on record displays a willful default on the part of the appellant, we hold that the extended period of limitation under the said provision could not be invoked against the appellant - extended period cannot be invoked. The appropriate classification of the services in question is Works Contract service and show cause notices not allege to demand service tax under Works Contract, therefore, the demand of service tax is set-aside - extended period also not invoked - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Classification of services under Works Contract or Construction of Residential Complex/Commercial or Industrial Construction Services.
2. Applicability of service tax prior to and post 01.06.2007.
3. Invocation of extended period of limitation.
4. Penalty under Section 80 of the Finance Act, 1994.

Detailed Analysis:

1. Classification of Services:
The primary issue was whether the construction services provided by the appellant, which included material, should be classified under "Works Contract" or "Construction of Residential Complex/Commercial or Industrial Construction Services." The appellant argued that their services should be classified under "Works Contract" as they provided construction services along with materials. The Tribunal referred to the Hon’ble Apex Court decision in the case of Larson & Toubro Limited, which clarified that works contracts involving transfer of property in goods and construction services should be classified under "Works Contract" services. The Tribunal concluded that the appellant's services correctly fall under "Works Contract" services and not under the categories initially classified by the Revenue.

2. Applicability of Service Tax:
The appellant contended that no service tax was payable for the period prior to 01.06.2007 as their activities were under a composite contract. The Tribunal agreed, noting that the concept of "Works Contract" was introduced in the Finance Act, 1994, effective from 01.06.2007. Therefore, for the period before this date, service tax was not applicable. Post 01.06.2007, the Tribunal held that service tax could only be demanded under "Works Contract" services, which was not alleged in the show cause notice.

3. Invocation of Extended Period of Limitation:
The Tribunal examined whether the extended period of limitation could be invoked. The appellant had sought information under RTI from various Commissionerates, which confirmed that service tax was not payable for construction of residential units for government departments/local bodies. The Tribunal referenced the decision in Uniworth Textiles Limited, which emphasized that the extended period could not be invoked in the absence of willful suppression or misstatement. The Tribunal concluded that the appellant acted in good faith based on the information received and thus, the extended period of limitation was not applicable.

4. Penalty under Section 80:
The appellant argued for waiver of penalties under Section 80, citing bona fide reasons for not paying the service tax. The Tribunal noted that the appellant had reasonable grounds to believe that service tax was not payable, supported by communications from various authorities. Therefore, the Tribunal found that penalties should be waived under Section 80 due to the appellant's bona fide belief.

Conclusion:
The Tribunal held that the appropriate classification of the appellant's services was under "Works Contract" and not under the initially classified categories. The demand for service tax was set aside due to the absence of allegations under "Works Contract" in the show cause notice. The extended period of limitation was not invokable, and penalties were waived under Section 80. Consequently, the impugned orders were set aside, and the appeals were allowed with consequential relief.

← Previous Next →