2018 (8) TMI 959 - AT - Service Tax

Works contract involving both supply and service - Erection Commissioning and Installation Services - service tax not paid - Held that - Admittedly the work executed by the appellant was a works contract as per the Works Contract Order placed on record involving both supply and service for the customers like Bangalore Development Authority plus Karnataka Industrial Area Development Board - Further the period involved in the present case is July 2003 to March 2006 and as per the judgment of the Hon ble Apex Court in the case of COMMISSIONER CENTRAL EXCISE & CUSTOMS VERSUS M/S LARSEN & TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT has held that service tax cannot be levied on works contract for the period prior to 1st June 2007 and the period in the present case is prior to 1st June 2007 - The period involved in the present case is July 2003 to March 2006 and as per the judgment of the Hon ble Apex Court service tax cannot be levied on works contract for the period prior to 1st June 2007 and the period in the present case is prior to 1st June 2007. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Duty demand confirmation along with interest
- Penalty imposition
- Applicability of service tax on works contract
- Additional evidence consideration by appellate authority

Duty Demand Confirmation along with Interest:
The appeal was against an order confirming duty demand and interest but setting aside penalties. The appellant was alleged to have undertaken works for government agencies without paying service tax under 'Erection, Commissioning and Installation Services'. The DGCEI calculated the service tax liability, which the appellant paid along with interest. A show-cause notice was issued demanding service tax, interest, and penalties. The original authority confirmed the demand and imposed penalties. The Commissioner rejected the appeal but dropped the penalties. The appellant challenged the order on grounds of law and evidence consideration.

Penalty Imposition:
The penalties under Sections 76, 77, and 78 of the Act were imposed by the original authority but were dropped by the Commissioner. The appellant sought to have the penalties dropped, arguing that the impugned order was unsustainable in law and failed to consider the evidence on record. The appellant contended that the issue was settled by the Hon'ble Apex Court and cited various decisions in support.

Applicability of Service Tax on Works Contract:
The appellant argued that the service tax demand was not sustainable as the works contract involved both supply and service, and service tax could not be levied on works contract for the period prior to 1st June 2007, as per the Hon'ble Apex Court's judgment. The appellant provided additional evidence, which the Commissioner did not consider. The Tribunal found that the work executed was a 'works contract' involving both supply and service, and the period in question was prior to 1st June 2007, making the appellant not liable to pay service tax.

Additional Evidence Consideration by Appellate Authority:
The appellant submitted additional evidence not considered by the Commissioner, citing the Hon'ble Apex Court's judgment and other decisions in support. The Commissioner had rejected the additional evidence on the grounds that it cannot be produced before the appellate authority. The Tribunal, after considering submissions from both parties and perusing the material on record, found in favor of the appellant, setting aside the impugned order and allowing the appeal with consequential relief.