2019 (6) TMI 204 - AT - Service Tax

Demand of service tax - Erection, Commissioning or Installation Service - Transport of Goods by Road Service - demand of interest and penalty as well - HELD THAT - The Appellant had undertaken the activity under a composite and indivisible works contract and by no means can it be said that it was a contract for Service simplicitor. In our opinion partial supply of material will not change the nature of the service provided by the appellant and it would still fall under the definition of Works Contract Service . The show cause notice was, however, issued to the Appellant alleging that the Appellant is providing ECIS. The position that comes out very clearly, therefore, is that even prior to 01 June, 2007 and post 01 June, 2007, the nature of service rendered by the Appellant was WCS and not ECIS. The show cause notice alleged that the Appellant was providing ECIS and the demand has also been confirmed under this category by the adjudicating authority. The impugned order, therefore, deserves to be set aside for this reason alone since the demand made under a particular category of service found to be incorrect in a subsequent proceeding, cannot be sustained. The issue that needs to be examined now is that though the Adjudicating Authority was not justified in confirming the demand under ECIS, but the appellant had admittedly collected Service Tax. The appellant is also not contesting that it is not required to deposit the Service Tax collected with the Department but what is sought to be contented is that the appellant had in addition to the amount that has been appropriated in the impugned order, deposited an amount of ₹ 16,614,934/- with the Department, (details of which have been mentioned at page 262 of the appeal memo.), which amount has not been considered by the Adjudicating Authority and, therefore, not appropriated. The confirmation of demand under heading ECIS with interest and penalty is set aside - The demand made under Goods and Transport Agency Service is maintained. So far as the appropriation of the amount is concerned, the matter is remanded to the Adjudicating Authority for passing a afresh order. Appeal allowed in part.

Summary

Issues Involved:
1. Whether the appellant was required to deposit Service Tax under the category of "Erection, Commissioning or Installation Service" (ECIS) for the period prior to and post 01 June 2007.
2. Whether the appellant was liable to pay Service Tax under "Transport of Goods by Road Service."
3. Appropriation of the amount deposited by the appellant during the investigation.
4. Imposition of interest and penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. ECIS vs. Works Contract Service (WCS):
The appellant argued that their contracts with M/s Suzlon Infrastructure Services Ltd. were composite works contracts, not merely ECIS, and thus could not be taxed under ECIS for the period prior to 01 June 2007. The Supreme Court in Larsen & Toubro Ltd. ruled that composite works contracts cannot be taxed under service categories like ECIS, which are intended for service contracts simpliciter. The Tribunal found that the appellant's contracts involved both supply of materials and services, making them composite works contracts. Consequently, the demand under ECIS was invalid both before and after 01 June 2007, as the correct classification should have been WCS. The adjudicating authority's confirmation of the demand under ECIS was set aside.

2. Service Tax on Transport of Goods by Road Service:
The appellant admitted to paying freight to a Goods Transport Agency but did not pay the corresponding Service Tax. The Tribunal upheld the adjudicating authority's decision that the appellant was liable to pay Service Tax under the "Transport of Goods by Road Service" by Reverse Charge Mechanism.

3. Appropriation of Deposited Amounts:
The appellant contended that the adjudicating authority only appropriated ?69,14,934/- out of the total amount deposited during the investigation, and failed to consider additional amounts deposited later. The Tribunal remanded this issue to the adjudicating authority to verify the appellant's claim and appropriately adjust the deposited amounts. The adjudicating authority was instructed to complete this verification within three months upon receipt of the necessary documents from the appellant.

4. Imposition of Interest and Penalties:
The Tribunal noted that the appellant did not contest the requirement to deposit collected Service Tax but argued for the refund of any excess amount deposited. The issue of interest for delayed payment and any balance refund was also remanded to the adjudicating authority for reconsideration. The adjudicating authority was directed to examine these aspects and pass a fresh order in accordance with the Tribunal's observations.

Conclusion:
The Tribunal set aside the demand under ECIS, maintaining the demand under "Transport of Goods by Road Service." The matter regarding the appropriation of deposited amounts and the imposition of interest and penalties was remanded to the adjudicating authority for further examination and appropriate action. The appeal was allowed to the extent indicated, with instructions for expeditious resolution.