2018 (12) TMI 18 - AT - Service Tax

Classification of services - certain works for Railways on works contract basis - Works contract service or not - Department seeks to demand service tax under management maintenance and repair services on the services rendered by them - reverse charge mechanism - liability of service tax on GTA service - Held that - It is not in dispute that the services rendered by the appellant during the relevant period involved both supply of materials and rendition of services and therefore are in the nature of works contract. The copies of the contracts provided by the learned counsel also clearly indicate that the nature of their contracts was works contracts. Further show cause notice itself mentions that they had entered into contracts with Railways for works contract. The Railways had deducted VAT on composition basis from their bills towards payment of VAT component on the goods supplied by them - the works contract in respect of Railways was excluded from the definition. There is no hesitation in holding that appellant s services were not exigible and they were not required to pay any service tax both before 01.06.2007 and after this date - demand set aside. GTA Service - liability of service tax - Held that - The appellant admitted that there is liability on some of the transaction of transportation of goods where they engaged the goods transport agencies to the extent of 9, 951/- on reverse charge mechanism - demand upheld alongwith Interest. Appeal allowed in part.

Summary

Issues:
1. Exigibility of service tax on works contract services rendered to Railways.
2. Liability on GTA services received by the appellant.

Exigibility of Service Tax on Works Contract Services:
The appellant, a sole proprietorship firm, undertook works for Railways on a works contract basis. The appellant contended that their services involved both supply of materials and rendition of services, falling under the category of works contract services. The appellant argued that as per the judgment of the Hon'ble Apex Court, works contract services became taxable only from 01.06.2007. The appellant highlighted that the services provided were solely to Railways, which were excluded from the definition of works contract services. The department sought to demand service tax under "management, maintenance and repair services." The Tribunal examined the contracts, which clearly indicated works contracts, and noted that VAT was deducted by Railways on the goods supplied. The Tribunal held that the appellant's services were not exigible to service tax both before and after 01.06.2007, as they fell outside the scope of works contract services.

Liability on GTA Services:
Regarding the liability on GTA services received by the appellant, the first appellate authority partially confirmed the demand. The appellant argued that the services were received from individual lorry owners and not from goods transport agencies. The Tribunal analyzed the situation and agreed with the first appellate authority's decision. It was noted that the transporters did not issue consignment notes as required by Rule 4B of the Service Tax Rules. The Tribunal referred to previous tribunal decisions to support its conclusion that the services provided did not fall under the definition of Goods Transport Agency services. The Tribunal upheld the decision on GTA services as per the impugned order and set aside the demand on certain transactions while remanding the rest for further verification.

In conclusion, the appeal was allowed concerning the demand on "management, maintenance & repair services" due to the nature of composite works contracts. The appeal on tax on GTA services was upheld in line with the impugned order, along with interest. The penalties imposed under Sec.77 & 78 were modified accordingly. The appeal was disposed of based on the findings and decisions outlined in the judgment.