2019 (6) TMI 685 - AT - Service Tax

Classification of construction services - Works Contract Service or not - Composition scheme - benefit of the N/N. 32/2007 - HELD THAT - It is a matter of record that the appellant discharged its Service Tax liability under reduced Service Tax rate by availing the benefit of Composition Scheme under works contract service for payment of Service Tax. It is also a matter of record that the appellant gave intimation for availing the benefit of the Notification No. 32/2007 to the Department on 22.6.2007, much before filing its ST 3 return for the services undertaken by it during the relevant period. As per the Supreme Court judgment in the case of Commissioner of Central Excise Cus, Kerala vs. Larsen and Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT , the activity involving labour and service charges as well as supply of goods and material will rightly be classifiable under the Work Contract Service as the work contract service was introduced for levy of Service Tax with effect from 01.06.2007. The demand of Service Tax prior to a period 1.6.2007 is not legally not sustainable. From 1.6.2007 onwards the appellant has paid Service tax by availing the composition scheme for payment of Service Tax as per Notification No. 32 of 2007 dated 22.05.2007. by rightly classifying its activity under the works contract service . Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Short payment of Service Tax due to availing wrong benefit of Notification No. 1/2006.
2. Allegation of switching over to a different service category to pay lesser Service Tax.
3. Show cause notice issued demanding Service Tax, penalties, and interest.
4. Adjudication confirming all charges against the appellant.
5. Appeal to Commissioner (Appeals) rejected, confirming the demands.
6. Classification of appellant's activity under 'work contract service'.
7. Applicability of Composition Scheme under 'works contract service'.
8. Legal sustainability of Service Tax demand pre and post 1.6.2007.
9. Supreme Court judgment regarding classification under 'Work Contract Service'.
10. Appellant's compliance with Composition Scheme under Notification No. 32/2007.

Analysis:
The case involved the appellant, engaged in construction activities, facing a demand for short payment of Service Tax due to wrongly availing the benefit of Notification No. 1/2006 and allegedly switching to a different service category to pay lesser tax. A show cause notice was issued, leading to confirmation of charges and penalties under sections 76, 77, and 78, with interest demanded. The Commissioner (Appeals) upheld the decision, prompting the appellant to argue that their activity was rightly classified under 'work contract service' and eligible for the Composition Scheme under 'works contract service'. The appellant contended that they informed the Department of opting for the Composition Scheme under Notification No. 32/2007 before the relevant period. The Tribunal noted the Supreme Court judgment emphasizing classification under 'Work Contract Service' post 1.6.2007 and the legality of demands pre that date. It was established that the appellant paid tax under the Composition Scheme, correctly classifying their activity, making the appeal allowed, setting aside the Commissioner's order.

This detailed analysis covers the issues of short payment, classification under 'work contract service', compliance with the Composition Scheme, and the legal sustainability of the Service Tax demands pre and post 1.6.2007, culminating in the Tribunal's decision to allow the appeal based on the correct classification and compliance by the appellant.