2018 (5) TMI 986 - AT - Service Tax

Works contract - composite contract - construction works mainly for customers like BSNL, LIC, All India Radio and Works of erection of cell phone towers etc for BSNL - The department was of the view that appellants are liable to pay service tax under Commercial or Industrial Construction Service upto the period 31.5.2007 and in respect of the very same activities, they are liable to pay service tax under Works Contract Services with effect from 1.6.2007 - time limitation. Held that - The contracts being composite in nature, the demand prior to 1.6.2007 cannot sustain as laid in the decision of Apex Court in Larsen & Toubro 2015 (8) TMI 749 - SUPREME COURT and therefore requires to be set aside. Demand with effect from 1/6/2007 - time limitation - Held that - Department has not adduced any evidence to establish that appellants had wilfully suppressed facts with intent to evade payment of tax. They had cooperated with department and furnished all details from which the demand has been quantified - the demand invoking the extended period cannot sustain and requires to be set aside - the demand for normal period is sustained All penalties except that imposed under Section 77 are set aside. Appeal allowed in part.

Summary

Issues involved:
1. Liability to pay service tax under different categories for construction works.
2. Applicability of service tax for the period before and after 1.6.2007.
3. Invocation of extended period for demand of service tax.
4. Allegation of suppression of facts by the appellants.
5. Confirmation of demand for cleaning services.
6. Imposition and setting aside of penalties.

Analysis:

Liability to pay service tax under different categories for construction works:
The appellants undertook various construction works for entities like BSNL, LIC, and All India Radio. The department contended that service tax was payable under "Commercial or Industrial Construction Service" until 31.5.2007 and under Works Contract Services from 1.6.2007. Additionally, non-payment of service tax for cleaning services was also noted. Show Cause Notices were issued, and the demand of service tax, interest, and penalties were confirmed by the authorities.

Applicability of service tax for the period before and after 1.6.2007:
The appellant argued that the contracts were composite in nature and relied on a Supreme Court judgment to contest the demand before 1.6.2007. For the period after 1.6.2007, the appellant claimed the demand was time-barred and that services were mainly provided to government agencies, thus not subject to service tax. The department supported the findings in the impugned order, confirming the demand under the composition scheme.

Invocation of extended period for demand of service tax:
The demand period in question was from October 2004 to March 2009. The Tribunal set aside the demand before 1.6.2007 based on the composite nature of the contracts and a Supreme Court decision. For the period after 1.6.2007, the demand was contested on the ground of limitation, and the Tribunal ruled in favor of the appellants due to lack of evidence of willful suppression.

Allegation of suppression of facts by the appellants:
The appellants contended that they believed services provided to government agencies were not subject to service tax, as confirmed by the agencies themselves. The Tribunal found no evidence of willful suppression and set aside the demand invoking the extended period.

Confirmation of demand for cleaning services:
A demand for cleaning services was confirmed, which the appellant acknowledged and accepted liability for. The Tribunal sustained this demand and set aside the penalty imposed.

Imposition and setting aside of penalties:
The Tribunal modified the impugned orders by setting aside the demand before 1.6.2007 on merits, ruling the demand after 1.6.2007 as time-barred, sustaining the demand for the normal period, confirming the demand for cleaning services, and setting aside all penalties except that imposed under Section 77.

This comprehensive analysis addresses the various issues involved in the legal judgment, detailing the arguments presented by both parties and the Tribunal's findings and decisions on each matter.