2018 (5) TMI 1122 - AT - Service Tax

Classification of services - construction of petrol pumps for Indian Oil Corporation Ltd. - whether the service rendered by the appellant is classifiable under the Head Works Contract or Erection Commissioning & Installation Service? - Held that - Commissioner (appeals) have erred in holding that Service Tax is payable under the head ECIS in spite of taking notice that goods/materials have been used in the execution of the construction contracts for petrol pumps for Indian Oil Corporation Ltd. - the appellant paid VAT on the material component utilised in such works contract. Accordingly, the work done by the appellant for Indian Oil Corporation Ltd. will be classifiable under the Heading Works Contract - appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of service under 'Works Contract' or 'Erection Commissioning & Installation Service'

Analysis:
The appeal revolved around determining the classification of the service provided by the appellant as either 'Works Contract' or 'Erection Commissioning & Installation Service.' The appellant was engaged in constructing petrol pumps for a specific company, handling all civil work and providing materials like cement, steel, sand, and chips. The appellant was registered with the U.P. Trade Tax Department and had been assessed to Trade Tax/VAT for the relevant period. The appellant argued that the court below misclassified their work and referred to a Supreme Court order stating that in complex contracts involving materials and service components, the classification should be under 'works contract' and not other service heads. The appellant's registration was also granted after the Service Tax liability under works contract came into force. The appellant sought to set aside the impugned order and claimed consequential benefits.

Upon review, the Tribunal found that the Commissioner had erred in concluding that Service Tax was payable under 'Erection Commissioning & Installation Service' despite the use of goods/materials in the construction contracts for petrol pumps. The appellant had already paid VAT on the material component used in the works contract. The Tribunal determined that the work done by the appellant for the specific company fell under the category of 'Works Contract' and noted that works contracts were not taxable before a specific date. Consequently, the appeal was allowed, the impugned order was set aside, and the appellant was granted consequential benefits as per the law.

In conclusion, the Tribunal ruled in favor of the appellant, classifying the service provided as a 'Works Contract' rather than 'Erection Commissioning & Installation Service.' The decision was based on the use of materials in the construction contracts and the appellant's VAT payments on the material component. The Tribunal's judgment aligned with the Supreme Court's interpretation of complex contracts involving both materials and services.