2018 (6) TMI 660 - AT - Service Tax

Commercial or Industrial Construction Service - Works contract service - taxability - Held that - The period prior to 1.6.2007 is covered by the decision in the case of Larsen &Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT . The demand prior to 1.62007 therefore requires to be set aside. Penalties for the Demand for the period after 1.6.2007 - Held that - Taking note of the fact that the issue was contentious, the penalty imposed is unwarranted and the same is set aside - The prayer of the appellant to permit the appellant to pay service tax for the period after 1.6.2007 under composition scheme under Service Tax Rules 2007 is only reasonable and is allowed. Appeal allowed in part.

Summary

Issues:
1. Liability to pay service tax for the period 2006-07 and 2007-08.
2. Applicability of penalties under section 78 and section 77 of the Finance Act.
3. Interpretation of whether the activity falls under works contract service or 'Commercial or Industrial Construction Service'.
4. Request for the appellant to pay service tax under the composition scheme.

Analysis:
1. The appellant had provided 'Commercial or Industrial Construction Service' to BSNL for the period 2006-07 and 2007-08 without discharging service tax. The original authority confirmed the demand of service tax, interest, and penalties. The Commissioner (Appeals) upheld the decision, leading to this appeal.

2. The appellant argued that the period before 1.6.2007 should not be subject to service tax based on the Supreme Court's judgment in Larsen & Toubro Ltd. v. State of Karnataka. The Tribunal agreed and set aside the demand for this period.

3. For the period after 1.6.2007, the appellant contended that the activity should be classified as works contract service, not 'Commercial or Industrial Construction Service'. The Tribunal acknowledged the interpretational issue and set aside the penalties imposed, allowing the appellant to pay the service tax under the composition scheme as per the Service Tax Rules 2007.

4. Consequently, the Tribunal modified the impugned order, setting aside the demand before 1.6.2007, penalties after 1.6.2007, and directing the department to permit the appellant to pay service tax for the latter period under the composition scheme. The appeal was partly allowed with the mentioned relief.