2018 (8) TMI 1511 - AT - Service Tax

Works contract - Completion of finishing services - contracts for partition work, paneling of work of wood, metal joinery and carpentry work, in respect of commercial or industrial buildings - Held that - For the period prior to 01.06.2007, following the ratio already laid down by the Apex Court in Larsen & Toubro 2015 (8) TMI 749 - SUPREME COURT , where it was held that Works contract were not chargeable to service tax prior to 1.6.2007 - the services provided by the appellant will not be exigible to service tax prior to 01.06.2007. For the period after 01.06.2007, the said services will have to discharge service tax liability under works contract - as this aspect is not forthcoming from the record, the matter is remanded for the limited purpose of ascertaining the claim of the appellant to have discharged service tax liability under works contract service w.e.f. 01.06.2007 till December 2007 under composition scheme. Penalty - Held that - The issue was mired in litigation and was only settled by the judgments of the Supreme Court - This being the case, the penalties imposed are set aside. Appeal allowed in part and part matter on remand.

Summary

Issues: Allegation of providing finishing services under construction service, tax liability on entire amount, applicability of service tax on works contract, discharge of tax liability under composition scheme, penalty imposition.

Analysis:

1. Allegation of Providing Finishing Services: The appellants were alleged to provide finishing services under construction service for commercial or industrial buildings and civil structures. The Department contended that these services fell under the category of 'completion of finishing services,' leading to the initiation of proceedings against the appellants through a Show Cause Notice proposing a significant demand of service tax, interest, and penalties.

2. Applicability of Service Tax on Works Contract: The appellant argued that the activity performed was akin to a works contract, a composite contract not subject to vivisection. Citing the judgment in Commissioner of C.Ex & Cus. Kerala Vs. Larsen & Toubro Ltd., it was asserted that service tax on works contract services would be applicable only from 01-06-2007. The appellants had registered under the works contract category, opted for the composition scheme, and filed returns indicating the discharge of tax liability from June 2007 onwards.

3. Discharge of Tax Liability under Composition Scheme: The appellant claimed to have discharged the tax liability under works contract services from June 2007 onwards. However, the absence of evidence supporting this claim before the original authority raised doubts regarding the actual discharge of tax liability during the specified period.

4. Judgment and Remand: The Tribunal held that services provided by the appellant would not attract service tax before 01-06-2007, aligning with the precedent set by the Apex Court. For the period after June 2007, the appellants were directed to discharge service tax liability under works contract services. The matter was remanded to ascertain the appellant's claim of discharging tax liability under the composition scheme from June 2007 to December 2007, emphasizing the provision of a fair opportunity for presenting additional documents.

5. Penalty Imposition: The Tribunal, considering the unsettled nature of the issue until clarified by Supreme Court judgments, set aside the penalties imposed, acknowledging the litigation surrounding the matter. Consequently, the appeal was allowed with directions to expedite the proceedings and conclude the matter promptly.

This detailed analysis encapsulates the issues, arguments, judgments, and directions outlined in the appellate tribunal's decision, providing a comprehensive overview of the legal judgment.