2018 (1) TMI 270 - AT - Service Tax

Classification of services - whether the services rendered by the appellant in respect of 52 contracts entered with various Govt. authorities need to be taxed under Maintenance & Repair Service (MMRS)/ Commercial & Industrial Construction Service (CICS)/Erection, Commissioning or Installation Services (ECIS)? - Held that - It is on record and undisputed that the adjudicating authority has specifically held that all the 52 contracts which has been executed by the appellants are with material - Learned Counsel was correct in bringing to our notice that the said findings of the adjudicating authority that the appellant is eligible for abatement of 67% of the value of the goods is in itself the acceptance of the fact that the contracts were executed with material. It is also on record that the Revenue has not contested these findings of the adjudicating authority before the Tribunal. Demand raised in some of the SCN in other classification, which was not proposed in the SCN - Held that - the law is fairly settled by the judicial pronouncement on this point i.e. the adjudicating authority cannot classify services if it is not proposed in the SCN. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of services rendered by the appellant under MMRS/CICS/ECIS, Adjudicating authority's confirmation of demand, Abatement of 67% of contract value, Vivisection of works contract, Change in classification by adjudicating authority, Judicial pronouncements on classification, Dispute of tax liability under proposed heads in show-cause notice.

Analysis:
The appeal challenged Order-in-Original No. 57 to 59/STC-I/SKS/12-13 dated 12.03.2013, concerning the classification of services provided by the appellant from 2005 to 2012. The show-cause notice alleged that the services rendered included construction/repair of government buildings, laying pipelines, and building sewerage treatment plants. The appellant contested the notice, arguing that the services did not fall under MMRS, CICS, ECIS, or works contracts. The adjudicating authority confirmed demands under CICS for some contracts, while in others, the classification was upheld from the notice without imposing penalties.

The appellant's counsel argued that the adjudicating authority's acknowledgment of 67% abatement for material supplied with contracts should classify them as works contracts, citing legal precedent. The counsel pointed out errors in the OIO's classification not alleged in the show-cause notice, contrary to established law as per various judicial decisions. The authorized representative contended that the authority's classification change was justified, citing precedents empowering such changes. However, the appellant referenced a Tribunal case supporting their position based on the Larsen & Toubro Ltd. judgment.

The Tribunal considered whether the services provided should be taxed under MMRC/CICS/ECIS or otherwise. The adjudicating authority's acceptance of material supply in all contracts implied works contracts, as supported by the Larsen & Toubro Ltd. judgment. The demand confirmation under different classifications not proposed in the notice was deemed unsustainable, following legal principles against such actions. The Tribunal distinguished the cases cited by the authorized representative, as they did not align with the current dispute over proposed tax liabilities. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief.

In conclusion, the Tribunal's detailed analysis focused on the correct classification of services, abatement considerations, vivisection of works contracts, and adherence to legal principles in confirming tax liabilities. The judgment emphasized the importance of aligning adjudication with show-cause notices and established legal precedents to ensure fair and accurate tax assessments.