2018 (8) TMI 28 - AT - Service Tax

Classification of services - Interior Decorator services or Works Contract Service? - appellant are not only providing materials like Gypsum boards etc. but also were also taking up the work of making false ceiling with these items - Held that - Interior Decorator services involve advice, consultancy, technical assistance related to planning design and beautification of space etc. This being so, any work involving beautification of space cannot by itself be brought within the fold of interior decorator . Thus, the appellant cannot then be brought within the fold of Interior Decorator Service - demand set aside. Show cause notices have also proposed demand of differential tax on the ground that provisions of Section 66 and 68 of the Finance Act, 1994 and Rule 3 of the Compensation Scheme have been contravened by not exercising the option as required under the Compensation Scheme etc. - it is found from para-5 of SCN dt. 0.09.2008 that the total taxable value for the impugned period is only ₹ 6,84,179/-. So also in respect of another SCN dt. 08.10.2009 it is found that the total taxable value is only ₹ 5,15,920/- - thus, the assertion of Ld. consultant on this score is correct - demand set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Classification of services under 'Interior Decorator' or 'Works Contract'
2. Eligibility for benefit under Compensation Scheme
3. Threshold limit exemption for service tax liability

Analysis:

Issue 1: Classification of services under 'Interior Decorator' or 'Works Contract'
The case involved a dispute regarding the classification of services provided by the appellants as either 'Interior Decorator Service' or 'Works Contract Service'. The department alleged that the appellants incorrectly paid service tax at a concessional rate under the Works Contract Compensation Scheme instead of the standard rate applicable to Interior Decorator services. The appellants argued that their services involved works contract activities like making false ceilings, which should be considered under the Works Contract category. The Tribunal analyzed the definitions and previous case laws related to 'Interior Decorator Service' and 'Works Contract' to determine the nature of services provided by the appellants. The Tribunal concluded that the activities performed by the appellants, such as making mirror paneling, false ceilings, and other similar works involving material supply, did not align with the definition of 'Interior Decorator Service.' The Tribunal cited relevant case laws and definitions to support their decision, ultimately ruling in favor of the appellants on this issue.

Issue 2: Eligibility for benefit under Compensation Scheme
The appellants claimed eligibility for the benefit of the Works Contract Compensation Scheme due to the nature of their services being more aligned with works contract activities. The Tribunal considered the submissions made by both parties regarding the procedural requirements for claiming benefits under the Compensation Scheme. The appellants argued that they had correctly discharged their tax liability under the Works Contract category and were eligible for the concessional rate. However, the department contended that the procedural requirements for availing the Compensation Scheme were not met by the appellants. After examining the facts and arguments presented, the Tribunal found merit in the appellants' claim and ruled in their favor, allowing them the benefit of the Compensation Scheme.

Issue 3: Threshold limit exemption for service tax liability
Another crucial aspect of the case was the appellants' assertion that they fell within the threshold limit for service tax exemption during the periods covered by the appeals. The Tribunal reviewed the taxable values for the respective periods mentioned in the show cause notices and confirmed that the appellants indeed fell within the threshold limits, resulting in no tax liability under any service tax category. Considering this, the Tribunal set aside the demands for differential tax amounts along with interest and penalties imposed by the department. The Tribunal upheld the appellants' argument regarding the threshold limit exemption and allowed the appeals on these grounds.

In conclusion, the Tribunal's detailed analysis and interpretation of the legal provisions, definitions, and previous case laws led to a favorable judgment for the appellants on all the issues raised in the case, ultimately resulting in the appeals being allowed in their favor.