2017 (12) TMI 1313 - AT - Service Tax

Composite contracts - commercial or industrial construction service - Held that - the status, nature and use of civil construction is relevant to decide the tax liability under commercial or industrial construction service. The status of recipient of service is of no relevance. If the building or civil structure is used for commercial purpose, tax liability may arise subject to fulfillment of other conditions. There should be clear finding in respect of claims made by the appellant with reference to certain civil structures as being non-commercial in use - The contracts with reference to construction of residential complex has also to be examined to determine whether the number of residential units are above 12 and the other requirements of the tax entry are fulfilled. There are multiple contracts subjected to service tax. It is necessary that each of the contracts is to be examined and finding recorded - matter is remanded back to the Original Authority for fresh decision after giving due opportunity to the appellant - appeal allowed by way of remand.

Summary

Issues:
Service tax liability of the appellant for the period January 2006 to January 2011 under various contracts.

Analysis:
The appeal challenged the order of the Commissioner of Central Excise, Raipur, confirming service tax liability of the appellant amounting to &8377; 53,66,681/- and imposing penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The appellant contended that the nature of contracts and services provided were not properly examined, leading to erroneous findings. They argued that the tax liability should be based on the nature of the building or structure, not the status of the recipient. The appellant raised concerns about the lack of detailed examination of the contracts and their tax implications by the Original Authority.

The Tribunal noted that the impugned order did not adequately address crucial issues such as whether the contracts involved composite nature with supply of goods, sale of goods, or construction of non-commercial buildings. Referring to a Supreme Court decision, the Tribunal emphasized that liability for service tax arises only from June 1, 2007, for certain types of contracts. It was highlighted that tax liability is determined by the nature and use of civil construction, irrespective of the recipient's status. The Tribunal stressed the importance of clear findings on the commercial or non-commercial nature of structures and the requirements for taxing residential complexes with more than 12 units.

Concluding that the impugned order was flawed due to various deficiencies, the Tribunal set it aside and remanded the matter to the Original Authority for a fresh decision after giving the appellant a fair opportunity. The Tribunal directed a detailed examination of each contract, considering the Supreme Court decision's applicability and ensuring clear findings on tax liabilities based on the nature of services provided and the use of structures. The appeal was allowed by way of remand, emphasizing the need for a thorough reassessment of the tax liabilities under the contracts.