2018 (11) TMI 84 - AT - Service Tax

Levy of Service tax - Composite Works Contract Service - abatement - period prior to 01.06.2007 - Held that - As far as the period prior to 01.06.2007 is concerned, the Hon ble Supreme Court in the case of Larsen & Toubro Ltd 2015 (8) TMI 749 - SUPREME COURT has held that prior to 01.06.2007, where after Finance Act, 2007 expressly made such contracts liable to service tax, there was no charging section specifically levying service tax only on works contracts - for the period prior to 01.06.2007, no service tax was payable by the appellant - deman dset aside. Period post 01.06.2007 - Held that - The tax demand is upheld along with interest and it has been paid as per the composition scheme before the issue of show cause notice - Section 73 (3) applies in this case and penalties set aside - demand of tax with interest upheld. Appeal allowed in part.

Summary

Issues:
Service tax liability on composite works contract pre and post 01.06.2007, imposition of penalties under Sec.76, 77, and 78 of the Finance Act, 1994.

Analysis:

1. Service Tax Liability on Composite Works Contract:
- The appellant was engaged in civil construction, erection, installation, and commissioning of cell towers, involving both service provision and material supply.
- Service tax evasion was alleged for work orders received between specific periods.
- The appellant registered under various service tax categories and paid tax under the composition scheme post 01.06.2007.
- The lower authorities confirmed demands, imposed penalties, and appropriated the tax already paid.
- The appellant contended that composite works contracts were not taxable pre-01.06.2007, citing the Larsen & Toubro Ltd case.
- The Tribunal upheld the non-taxability pre-01.06.2007 and confirmed tax liability post that date under the composition scheme, setting aside penalties under Sec.77 and 78.

2. Imposition of Penalties under Sec.76, 77, and 78:
- The lower authority imposed penalties under Sec.78 and a nominal penalty under Sec.77 but refrained from imposing a penalty under Sec.76.
- The appellant argued against the imposition of penalties, citing timely payment under the composition scheme and the non-taxability of composite works contracts pre-01.06.2007.
- The Tribunal set aside penalties under Sec.77 and 78, considering the appellant's compliance with the composition scheme and the legal position on tax liability pre-01.06.2007.

3. Conclusion:
- The Tribunal set aside the service tax demand for the period pre-01.06.2007, confirmed the demand post that date under the composition scheme, and waived penalties under Sec.77 and 78 due to timely payment and legal non-taxability pre-01.06.2007.
- The appeal was disposed of accordingly, with the operative part pronounced in the open court.

This judgment clarifies the tax liability on composite works contracts, distinguishes pre and post 01.06.2007 scenarios, and emphasizes compliance with the composition scheme to avoid penalties under the Finance Act, 1994.