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2019 (2) TMI 141 - AT - Service TaxWorks Contract Service - composition scheme - Department was of the view that the appellant is not eligible for abatement as per N/N. 7/2006 since they have availed Cenvat credit on input services - period involved is from Apr. 07 to Mar. 11 - Held that - Undisputedly, the works executed or the contracts entered are of composite in nature as it involves supply of materials as well as element of services - The Hon ble apex court in the case of M/s. Larsen & Touboro Ltd., 2015 (8) TMI 749 - SUPREME COURT has held that such contracts which are composite in nature are not leviable to service tax prior to 01 .06.2007. Following the same, the demand prior to 01.06.2007 cannot Sustain and requires to be set aside. The Tribunal in the case of M/s. Real Value Promoters Pvt. Ltd., 2018 (9) TMI 1149 - CESTAT CHENNAI had discussed in detail the leviability of service tax on composite contracts under the category of CCS/CICS/ECIS for the period after 01.06.2007. The Tribunal therein had observed that after 01.06.2007, the demand for such composite contracts can attract the levy of service tax under the category of Works Contract Services only. The demand prior to 01.06.2007 or after cannot sustain - Appeal allowed - decided in favor of appellant.
Issues:
Demand of service tax under Construction of Residential Complex Services; Eligibility for abatement under Notification No. 7/2006; Composite nature of contracts; Applicability of service tax pre and post 01.06.2007; Interpretation of works contract services; Classification of services under CICS/CCS/RCS; Legal validity of demand and penalties imposed. Analysis: The case involved a show-cause notice issued to the appellant for the demand of service tax under Construction of Residential Complex Services. The appellant had been paying service tax under the works contract services post 01.06.2007 under the composition scheme. The department contended that the appellant was not eligible for abatement as they had availed Cenvat credit on input services. The original authority confirmed the demand along with interest and penalties, leading to the appeal. The appellant argued that activities pre-01.06.2007 were composite contracts involving both supply of materials and services, hence not subject to service tax. They cited a Tribunal decision in a similar case to support their stance. The Tribunal acknowledged that pre-01.06.2007, composite contracts were not liable to service tax, following the precedent set by the Supreme Court in the Larsen & Toubro case. Regarding the period post 01.06.2007, the Tribunal referenced a case involving the leviability of service tax on composite contracts under Construction of Complex Service. The Tribunal emphasized that such contracts could attract service tax under Works Contract Services post 01.06.2007. The Tribunal reiterated that composite works contracts, involving both material supply and services, could not be classified as pure service contracts under CICS/CCS/RCS. The Tribunal highlighted the significance of the Union Finance Minister's budget speech in 2007, indicating that composite contracts were brought under the levy of service tax only from 01.06.2007. The judgment in Larsen & Toubro case was crucial in establishing that there could be no service tax on composite contracts pre-01.06.2007. The Tribunal further emphasized that works contract services encompassed activities like erection, commissioning, and construction, distinct from general service activities. The Tribunal dismissed the demand both pre and post 01.06.2007, emphasizing that composite works contracts could not be subjected to service tax under CICS/CCS/RCS. The proceedings in all appeals were deemed unsustainable due to the nature of the contracts involved. Consequently, the appeal was allowed with consequential reliefs, if any.
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