2018 (1) TMI 216 - AT - Service Tax

Classification of services - renovation, restoration, maintenance work with reference to various buildings like hotels, hospitals etc - Revenue contended that the services rendered by the appellant are liable to be taxed under the category of construction service during the period 10/09/2004 to 15/06/2005 and repair and maintenance of immovable property service for the period 16/06/2005 to 25/07/2007 - appellants claimed that the services provided by them are essentially restoration and renovation of immovable property and accordingly they are eligible to avail abatement of 67% in the taxable value. Held that - an illustrative list of the various work executed by the appellant was provided. A brief of some of the sample work orders/contracts were also reproduced by the Original Authority in the said para. We have perused the same alongwith the applicable statutory entry relevant to construction services w.e.f. 10/09/2004. The relevant clause of the construction services in terms of Section 65 (3a) of the Finance Act, 1994 is repair, alteration or restoration of, or similar services in relation to building or civil structure . Regarding change of classification w.e.f. 16/06/2005, the Original Authority recorded that in most of the contracts, the appellant used the term maintenance and even if they have sometimes used the term restorations it is more akin to maintenance as the services were of continuous nature for maintaining properly in the hotel premises. It was observed that whatever terms were used in the agreements or contracts, the same were examined in the overall context to understand the scope of work before classifying the same under management or maintenance. CENVAT credit - payment of 6% / 8% on the value of exempted services - Rule 6 (3) (i) of the Cenvat Credit Rules, 2004 - Held that the appellants have deposited the whole of Cenvat credit amounting to ₹ 2,97,310/- alongwith interest for delayed payment. As such, it should be considered that they have not availed such credit to attract the rigorous of Rule 6 (3) of Cenvat Credit Rules - the demand for the said amount for violation of Rule 6 (3) is not sustainable - penalty relevant to the said dispute is also liable to be set aside. Extended period of limitation - Held that - the appellants were engaged in providing such taxable service to various corporate entities in a large scale operation. In this connection, we have perused the findings of the impugned order justifying the demand for extended period. The appeal filed by the appellant is dismissed except for setting aside the demand under Rule 6 (3) of Cenvat Credit Rules, 2004

Issues Involved:
1. Classification of services provided by the appellant.
2. Eligibility for abatement of 67% under Notification No. 15/2004-ST.
3. Applicability of Rule 6 (3) of Cenvat Credit Rules, 2004.
4. Imposition of penalties under Section 78 and Rule 15 (4) of Cenvat Credit Rules, 2004.
5. Validity of extended period for demand.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Appellant:
The main dispute centered around the correct taxable category of services provided by the appellant, which included restoration of bathrooms, swimming pools, floors, maintenance of marble floors, granite, deep cleaning of floors, polishing, honing, etc. The appellant argued that these services fell under "construction service" or "commercial or industrial construction service," allowing for a 67% abatement in taxable value. The Revenue, however, classified these services under "maintenance or repair service" or "management, maintenance or repair service" for different periods. The Original Authority concluded that from 10/09/2004 to 15/06/2005, the services were under "construction service," but from 16/06/2005 to 25/07/2007, they fell under "maintenance or repair service." The Tribunal upheld this classification, noting that the services were provided for maintaining existing properties, not constructing new ones.

2. Eligibility for Abatement of 67% under Notification No. 15/2004-ST:
For the period from 10/09/2004 to 15/06/2005, the services were classified under "construction service," and the appellant claimed abatement of 67% from the value. The Original Authority found that the assessable value included the value of materials used, making the appellant eligible for the abatement. The Tribunal agreed with this finding, confirming that the appellant was entitled to the abatement for this period.

3. Applicability of Rule 6 (3) of Cenvat Credit Rules, 2004:
The appellant contested the demand for 6%/8% on the value of exempted services due to non-maintenance of separate accounts on common input services. They argued that since they had reversed the entire Cenvat credit amounting to ?2,97,310/- along with interest, it should be treated as non-availment of credit. The Tribunal agreed, citing the Supreme Court's decision in Chandrapur Magnet Wires (P) Ltd., which held that reversed credit should be considered as not availed. Consequently, the demand of ?8,35,048/- and the associated penalty were set aside.

4. Imposition of Penalties under Section 78 and Rule 15 (4) of Cenvat Credit Rules, 2004:
The appellant contested the penalties imposed, arguing that the issue was one of interpretation and classification of services. The Tribunal, however, upheld the penalties related to the confirmed service tax demand, finding no substantial or crucial aspect left unaddressed by the Original Authority. The penalties attributable to the demand under Rule 6 (3) were set aside, as the demand itself was not sustainable.

5. Validity of Extended Period for Demand:
The appellant argued against the extended period for demand, claiming no suppression of facts with intent to evade tax. The Tribunal reviewed the findings of the Original Authority and concluded that the appellant, engaged in large-scale operations, did not discharge their service tax liability based on a bonafide understanding. Thus, the extended period for demand was justified.

Conclusion:
The appeal was dismissed except for setting aside the demand under Rule 6 (3) of Cenvat Credit Rules, 2004, and the associated penalties. The Tribunal upheld the classification and service tax demand as confirmed by the Original Authority, except for the disputed amount under Rule 6 (3). The penalties related to this non-sustainable demand were also set aside. The order was pronounced in open court on 03/01/2018.

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