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2019 (4) TMI 1257 - AT - Service TaxWorks Contracts Service - work orders awarded by NTPC - main thrust of the arguments advanced on behalf of both the appellants is that these work orders are in the nature of Works Contracts ? - HELD THAT - The law on the point regarding leviability of the Service Tax on indivisible Works Contracts has been settled by the Hon ble Supreme Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT . The Apex court held that such contracts are liable for Service Tax only under the category of Works Contract Service with effect from 01/06/2007 and further that such contracts cannot be charged to Service Tax under any other category prior to 01/06/2007. The work orders are required to be scrutinized denovo to decide the liability of Service Tax, if any. The Adjudicating Authority did not have the benefit of the decision of the Hon ble Supreme Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT - Under the circumstances, the impugned orders merit to be set aside and the issue remanded to the Adjudicating Authority for Denovo decision on the Service Tax liabilities of both the appellants involved. Appeal allowed by way of remand.
Issues:
1. Taxability of works contracts under Service Tax laws. 2. Liability of subcontractors for Service Tax payments. 3. Application of relevant legal precedents in determining Service Tax liability. Analysis: Issue 1: Taxability of works contracts under Service Tax laws The case involved appeals against demand of Service Tax on construction activities under the category of 'Commercial or Industrial Construction Service'. The appellants argued that the work orders were in the nature of indivisible works contracts and liable for Service Tax only after the introduction of 'Works Contract Service' post 01/06/2007. They relied on the Supreme Court decision in CCE & CX, Kerala vs. Larsen and Toubro Ltd., which held that such contracts cannot be taxed under any other category before 01/06/2007. The appellants contended that construction of a dam, as in this case, was excluded from taxable services. They also challenged the lack of abatement for materials supplied and argued for time-barring of demands pre-March 2007. Issue 2: Liability of subcontractors for Service Tax payments The subcontractor, represented by a different advocate, argued that no Service Tax was payable by them as they acted as subcontractors to the main contractor. They highlighted circulars by CBEC stating subcontractors are not liable if the principal contractor covers the entire value for Service Tax. The subcontractor's entire value of work was included in the main contractor's work orders, absolving them of Service Tax liability. Various legal precedents were cited to support this argument. Issue 3: Application of relevant legal precedents in determining Service Tax liability The Revenue authorities contended that the work orders needed re-examination in light of the Larsen and Toubro case, emphasizing the supply of main materials by the client. The Tribunal acknowledged settled law on indivisible works contracts and directed a fresh scrutiny of the work orders to determine Service Tax liability. The Tribunal set aside the impugned orders, remanding the issue back to the Adjudicating Authority for a denovo decision guided by the Supreme Court's decision in the Larsen and Toubro case. The Tribunal also considered the subcontractor's arguments and circulars in favor of subcontractors not being liable for Service Tax payments. In conclusion, the Tribunal allowed the appeals by way of remand, setting aside the orders and directing a fresh examination of the work orders to determine the Service Tax liabilities in accordance with legal precedents and relevant circulars.
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