2018 (9) TMI 663 - AT - Service Tax

Construction Services - construction of staff quarters for Singareni Colleries Company Limited and construction of housing complex for the Government of Jharkhand for conducting national games - whether the said services would be taxable under the head construction of residential complex service or otherwise? Held that - On cursory perusal of the contract awarded to the appellants, it indicates that it is a composite contract and can merit classification under the category of works contract services. It seems that the adjudicating authority has not considered the issue from this angle - Since the question of classification needs reconsideration, without expressing any opinion on the merits of the case as to the rejection of refund claims filed by the appellant, the impugned order is set aside and matter remitted back to the adjudicating authority to reconsider the issue afresh, after following the principles of natural justice. Appeal allowed by way of remand.

Summary

Issues:
1. Classification of services rendered by the appellant under the category of construction of residential complex service.
2. Disputed service tax liability and refund claims based on the nature of services provided.
3. Application of the doctrine of unjust enrichment in the case.

Analysis:
1. The judgment revolves around the classification of services provided by the appellant under the construction of residential complex service category. The appellant undertook construction activities for staff quarters and a housing complex for a government project. The Revenue contended that the appellant was liable to pay service tax on these services. However, the appellant disputed this classification, arguing that the contracts were awarded before the relevant tax regime came into effect. The appellant claimed that the services provided were composite in nature and not taxable. The lower authorities classified the services as construction of residential complex services and rejected the appellant's refund claims, citing the doctrine of unjust enrichment.

2. The appellant's counsel argued that the contracts were awarded before the taxable services regime, and the tax liability was not included in the contract price. The appellant had paid the tax under protest and sought reimbursement from the service recipients, who refused, claiming the services were composite and not taxable. The counsel relied on a Supreme Court judgment to support the argument that pre-2007 composite contracts were not taxable. The Revenue, however, maintained that the services provided fell under the construction of residential complex category and that the appellant failed to prove that the tax burden was not passed on to the recipients.

3. The Tribunal, after considering the submissions, found that the matter required reconsideration by the adjudicating authority. It noted that the contracts appeared to be composite in nature and could potentially be classified as works contracts. The Tribunal highlighted that the lower authorities had not adequately considered this aspect and directed a fresh review, emphasizing the need to apply the principles of natural justice. The Tribunal set aside the previous orders and remanded the case for a reevaluation, allowing the appellant to provide evidence supporting the composite nature of the contracts and the non-passing of the tax burden to the service recipients.