2019 (3) TMI 38 - AT - Service Tax

Classification of services - Construction services - activity of construction of foundation roads etc. - composite services - Held that - The activity of construction of foundation roads etc., are in the nature for Composite Service in which the appellant was required to supply the materials to be used in the construction activity. Such composite service is to be classified only under the Work Contract Service introduced with effect from 1/06/2007, in view of the decision of the Hon ble Supreme Court in case of Larsen and Turbo 2015 (8) TMI 749 - SUPREME COURT . By following the decision of the Apex Court, the demand for service tax for the period upto 31/05/2007 is set aside. For period commencing on 1/06/2007, the composite services would be liable for classification under Works Contract Service only - But we note the SCN has proposed the demand for service tax under the category of Commercial and Industrial Construction Service as well as Repair and Maintenance Service. Hence the confirmation of demand under the category of WCS will not be proper particularly in view of the decision of the Tribunal in case of Ashish Ramesh Dasarwar 2017 (9) TMI 1001 - CESTAT MUMBAI wherein Tribunal has taken the view that demand for Service Tax is to be set aside if the Show Cause Notice proposed a classification different from WCS for construction activity - the demand for service tax made under the (CICS) category for Construction of foundation/ roads as well as repair of roads set aside. Activity of laying pipes supplied by the customers - Commercial or Industrial Construction Service or not? - Held that - To take a final view in respect of liability of service tax for the activity of laying of pipelines, the relevant contracts executed are required to be verified. For such purpose, the demand is set aside and the matter remanded to the Adjudicating Authority to take a de Novo decision only on this activity. Appeal allowed in part and part matter on remand.

Summary

Issues:
- Classification of construction services for service tax liability
- Denial of abatement for laying of pipelines supplied by customers

Classification of construction services for service tax liability:
The appeal involved a dispute regarding the classification of construction services for service tax liability. The appellant provided various construction services during 2006-07 and 2007-08, leading to a demand for service tax under Commercial or Industrial Construction Services (CICS) and Repair and Maintenance Services. The Adjudicating Authority upheld the demand after granting abatement but denied it for the laying of pipelines where the pipes were supplied by customers. The appellant argued that the services were composite and should be classified under Works Contract Service (WCS) based on legal precedents, including a decision by the Hon'ble Supreme Court. The Tribunal agreed, setting aside the demand for service tax up to 31/05/2007 and classifying the services under WCS from 01/06/2007 onwards. The Tribunal also noted that the demand was incorrectly proposed under CICS and Repair and Maintenance Services, not WCS, and thus set aside the demand for those categories.

Denial of abatement for laying of pipelines supplied by customers:
Regarding the laying of pipelines supplied by customers, the Adjudicating Authority ordered payment of service tax under CICS but denied abatement. The appellant contended that this activity should also be classified under WCS as a composite service. However, due to the unavailability of relevant contracts for verification, the Tribunal remanded the matter to the Adjudicating Authority for a de novo decision solely on this activity. The Authority was directed to review the contracts, consider legal precedents, and classify the activity correctly. The Tribunal set aside the demand for service tax overall, instructing the Authority to pass a new order specifically addressing the laying of pipelines.

In conclusion, the Tribunal ruled in favor of the appellant on the classification of construction services for service tax liability, setting aside the demand and directing a de novo decision for the laying of pipelines supplied by customers. The judgment emphasized the correct classification under WCS based on legal precedents and the necessity to verify relevant contracts for accurate assessment.