2019 (2) TMI 1308 - AT - Service Tax

Works Contract service - construction services - Revenue has challenged the portion of the adjudicating order in which substantial portion of demand proposed in the show cause notice has been dropped - time limitation - Held that - For the period prior to 01/07/2012, the classification of service was required to be done and activities carried out are to be classified under Works Contract Service. The show cause notice issued on 23/10/2013 has proposed the demand of service tax under the categories of Commercial or Industrial Construction Service as well as Erection and Commissioning Service - As such since the classification has been held to be under WCS, there is no infirmity in the findings of the adjudicating authority to the effect that the demand prior 01/07/2012 is liable to be set aside. Demand for the period commencing 01/07/2012 - Held that - After the amendment to the Finance Act, 1994, there is no need for classification of service into various categories. The demand confirmed by the adjudicating authority for the service provided to Joint Stock Company FEAT is for the period 2012-13 and as such will be liable for payment of service tax - the liability for service tax under WCS in respect of the activity carried out to Joint Stock Company is to be re-determined after extending the benefit of abatement under Notification No. 24/2012. When said benefit is extended the ultimate demand of service will come down from ₹ 3.67 lakh confirmed by adjudicating authority - the original authority is directed to verify such payment of service tax claimed by the M/s Lattice. Appeal disposed off.

Summary

Issues:
1. Service tax liability for commercial or industrial construction services provided by M/s Lattice.
2. Classification of services provided by M/s Lattice under Works Contract Service.
3. Validity of the demand raised in the show cause notice.
4. Applicability of service tax for specific contracts with entities like Indian Oil Corporation and Joint Stock Company FEAT.

Issue 1: Service tax liability for commercial or industrial construction services provided by M/s Lattice

The case involved M/s Lattice, registered for commercial or industrial construction services, facing a service tax demand of ?1,40,34,651 for the period 2008-09 to 2012-13. The adjudicating authority dropped the demand for services not meant for commercial use, like those provided to Prasar Bharti and residential units for employees. However, services to entities like Joint Stock Company and Indian Oil Corporation were held liable for service tax. The authority classified pre-2012 services as Works Contract Service, setting aside the demand, but upheld a demand of ?3,90,208 for specific services.

Issue 2: Classification of services provided by M/s Lattice under Works Contract Service

The adjudicating authority classified M/s Lattice's activities as Works Contract Service for the period before July 2012, aligning with the Supreme Court's decision on composite contracts. The show cause notice proposed demand under different categories, but since the activities were classified as Works Contract Service, the demand for the pre-2012 period was set aside. The authority confirmed a demand for services post-July 2012, including services to Joint Stock Company FEAT, subject to re-determination after considering abatement benefits.

Issue 3: Validity of the demand raised in the show cause notice

The Revenue challenged the dropping of a substantial portion of the demand in the show cause notice, while M/s Lattice contested the ?3.9 lakhs demand. The Revenue argued that the notice covered the demand from April 2008, citing Section 73 of the Act. M/s Lattice contended that the notice served in October 2013 limited the demand period. The adjudicating authority's scrutiny of contracts and classification under Works Contract Service supported setting aside the pre-2012 demand.

Issue 4: Applicability of service tax for specific contracts with entities like Indian Oil Corporation and Joint Stock Company FEAT

The Revenue challenged the treatment of specific contracts, like those with NBCC Ltd and NTPC Solapur, arguing against exemptions. M/s Lattice's consultant countered, citing the authority's examination of contracts and the classification under Works Contract Service. The demand for services to Indian Oil Corporation and Joint Stock Company FEAT was confirmed, subject to re-determination considering abatement benefits. The Tribunal upheld the decision to set aside the pre-2012 demand and directed verification of the service tax payment claimed by M/s Lattice.

This detailed analysis covers the service tax liability, classification under Works Contract Service, validity of the demand notice, and the applicability of service tax for specific contracts in the judgment involving M/s Lattice.