2019 (2) TMI 1176 - AT - Service Tax

Construction services - Commercial or Industrial Construction - Construction of Residential Complex Service - benefit of exemption under Notification No.1/06-ST dated 01.03.2006 - period 2006-07 to 2010-11 - Held that - The appellant has admittedly provided construction services. After perusal of some of the contracts whose copies were submitted by the appellant, the adjudicating authority himself has recorded the conclusion that the services provided by the appellant will be classifiable under the category of Works Contract Service w.e.f. 01.06.2007 - In view of the decision of the Hon ble Apex Court in the case of L & T 2015 (8) TMI 749 - SUPREME COURT , the demand of service tax for the period prior to 01.06.2007 is liable to be set aside. Demand beyond the normal period of limitation under section 73 of the Finance Act - Held that - It is on record that the appellant was already registered with the Department for providing various services. They have also been filing ST-3 returns periodically in which they have declared the value of services provided and the fact that they were paying the Service tax under the category of commercial or industrial construction services, after availing the benefit of the Notification No.01/2006. The Department appears to have taken the view that the activities are more appropriately classifiable under the category of Works Contract Service, only during the course of audit of the records - there is no ground for alleging suppression - the demand for the period beyond the normal time limit is set aside on the ground of time bar. Benefit of Works Contract Service (Composition Scheme) - Held that - The non-exercise of the option for payment of tax under the Composition Scheme cannot be held as a reason to deny the benefit of the competition scheme since it is in the form of only a procedural requirement - the appellant will be entitled to the Composition Scheme subject to fulfilment of the other conditions - the service tax liability of the appellant is required to be re-calculated after extending the benefit of Composition Scheme and after allowing them the cum-duty benefit. The demand for service tax beyond the normal period of limitation set aside - For the demand of Service Tax falling within the normal time limit, the services, already classified by the adjudicating authority under WCS, will be entitled to the benefit of the Composition Scheme. The demand, if any, is to be re-calculated with cum-tax benefit and the appellant will be entitled to the consequential benefit if any - appeal allowed by way of remand.

Summary

Issues:
1. Classification of services under Works Contract Service (WCS) after its introduction in 2007.
2. Denial of abatement claimed under Notification No.1/06-ST.
3. Liability for payment of service tax for the period prior to 01.06.2007.
4. Benefit of Works Contract Composition Scheme.
5. Failure to submit all relevant contracts for verification.
6. Time bar for demanding service tax beyond the normal period of limitation.
7. Eligibility for Composition Scheme despite not fulfilling Rule 3 requirements.

Analysis:
1. The appellant, engaged in construction activity, was registered for providing Commercial or Industrial Construction and Construction of Residential Complex services. The Department contended that services rendered post-01.06.2007 were classifiable under Works Contract Service. The appellant had availed abatement under Notification No.1/06-ST. The dispute arose due to the Department's denial of abatement claimed by the appellant.
2. The adjudicating authority confirmed a service tax demand for the appellant, concluding that a portion of the demand was not liable for payment concerning services provided to educational institutions. The appellant challenged this order, arguing that the demand prior to 01.06.2007 should be set aside based on the Supreme Court's decision in Larsen & Toubro case.
3. The appellant contended that the demand beyond the normal time limit should be set aside due to the Department's delayed classification of services. The appellant had been filing returns periodically under the Commercial or Industrial Construction category, claiming abatement. The adjudicating authority's decision was made before the Supreme Court's clarification on works contract services.
4. Regarding the Works Contract Composition Scheme, the appellant argued that they should be entitled to it, despite not initially opting for it as per Rule 3. The appellant cited precedents to support their claim that non-exercise of the option should not render them ineligible for the Composition Scheme.
5. The appellant's failure to submit all relevant contracts for verification was raised by the Department as a reason for upholding the demand post-01.06.2007. The Department argued that without complete verification, the demand was justified.
6. After hearing both sides, the Tribunal set aside the demand for service tax beyond the normal period of limitation. The appellant's compliance with the Composition Scheme requirements was considered, and they were deemed eligible for the scheme, with the service tax liability to be recalculated accordingly.
7. The Tribunal's final order included setting aside demands beyond the normal period, granting the Composition Scheme benefit for services within the time limit, and recalculating any applicable demands with cum-tax benefit. The appeal was disposed of accordingly.