2019 (5) TMI 151 - AT - Service Tax

Classification of service - composite works contract for construction of houses for Tsunami affected victims - Works Contract service or construction of residential complex service? - HELD THAT - It is very clear that the contracts were in the nature of works contracts that involved both supply of material and labour. Even if the SCN has considered only the services rendered by the appellant, the entire service is only composite works contract. This being so, notwithstanding the protestations of the Ld. AR, the ratio of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT will be applicable on all fours to this issue. The demand of tax under construction of complex service cannot then sustain and will require to be set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the demand of service tax on the appellants for construction of houses under "Construction of Residential Complex Services" is valid.
2. Whether the appellants' activity falls under the category of Composite Works Contract involving supply of materials along with labor services.
3. Whether the demand of duty is solely on services or includes the cost of materials.

Analysis:
1. The case involved a dispute regarding the demand of service tax on the appellants for constructing houses, categorized under "Construction of Residential Complex Services." A Show Cause Notice was issued proposing a demand of &8377; 65,89,179/- along with interest and penalties. The Commissioner confirmed the demand in the impugned order, leading to the appeal.

2. During the hearing, the appellant argued that the activity conducted was akin to a Composite Works Contract involving both supply of materials and labor services. Citing a judgment of the Hon'ble Apex Court, the appellant contended that the demand under the category of Construction of Residential Complex Services could not be sustained. The Tribunal observed that the contracts were indeed works contracts encompassing both material supply and labor. Despite the focus on services in the Show Cause Notice, the entire service was deemed a composite works contract. Thus, the demand under construction of complex service was held unsustainable, following the precedent set by the Larsen & Toubro case.

3. The respondent, however, pointed out that the demand of duty was only on services, highlighting the deduction of the cost of cement and steel in the appeal paper book. After considering both arguments and reviewing the facts, the Tribunal concluded that even if the demand was based on services alone, the nature of the service provided by the appellants constituted a composite works contract. Therefore, the demand of tax under construction of complex service was deemed unsustainable, and the appeal was allowed with any consequential benefits as per law.

This detailed analysis of the judgment highlights the key legal issues, arguments presented by both parties, and the Tribunal's reasoning leading to the decision in favor of the appellant.