2019 (11) TMI 678 - AT - Service Tax

Classification of services - Construction Services or Works Contract Services? - Valuation - Benefit of abatement claim - N/N. 15/2004-ST dated 10.09.2004 and Notification No. 01/2006-ST dated 01.03.2006 - It was observed that the appellant did not pay service tax on TDS deducted from the payments released by various parties, amount adjusted on account of electricity charges, water expenses and ESI expenses, retention money and mobilisation advance for the period 10.09.2004 to February 2006 - denial of abatement on the ground that the appellant has availed cenvat credit on Telecom Services. Classification of services - Whether the activities of construction of complex developed by Nagar Panchayat, building of private college and boundary wall of different parties undertaken by the appellant and are liable to be taxed under Construction Services or Works Contract Services as same has been provided alongwith material? - HELD THAT - The issue has already been settled by the decision of the Hon ble Apex Court in the case of Larson Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT wherein it has been held that prior to 01.06.2007, if service is provided alongwith material, no service tax is payable by the assessee. Further, for the period, post 01.06.2007, the demand of service tax can be made only under Works Contract Services - Admittedly, in the case in hand, for the period prior to 01.06.2007, the appellant is providing construction services alongwith material, therefore, the appellant is not liable to pay any service tax. For the period, post 01.06.2007, there is no proposal made by the revenue under works contract service - for services provided by the appellant construction of complexes developed by Nagar Panchayat, Building of private college and boundary wall of the different parties, the appellant is not liable to pay service tax under construction service but merit classification is Work Contract Service - decided in favor of appellant. Valuation - Whether free supplies of material is required to be included in the assessable value of services provided by the appellant or not?? - HELD THAT - The said issue has been settled by the Hon ble Apex Court in the case of Bhayana Builders (P) Ltd. 2018 (2) TMI 1325 - SUPREME COURT where it was held that - the appellant is not liable to pay service tax on the value of free material supplied by the service recipient - this issue is also answered in favour of the appellant. Whether the appellant is entitled for the benefit of Notification No. 01/2006-ST dated 01.03.2006 when they have reversed the cenvat credit availed on input services alongwith interest before issuance of the show cause notice or not? - HELD THAT - The appellant has already reversed the cenvat credit availed on Telecom Services alongwith interest before issuance of the show cause notice, in that circumstances, we hold that the appellant is entitled for the benefit of Notification No. 01/2006-ST dated 01.03.2006. The appellant is not liable to pay service tax - Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Whether the activities of construction undertaken by the appellant are taxable under Construction Services or Works Contract Services.
2. Whether free supplies of material should be included in the assessable value of services.
3. Whether the appellant is entitled to the benefit of Notification No. 01/2006-ST dated 01.03.2006.

Issue No. 1:
The appellant contended that for the period prior to 01.06.2007, no service tax is payable if services are provided along with material, citing the decision in CCE & C vs. Larsen & Toubro Ltd. Post 01.06.2007, the demand can only be under 'Works Contract Services.' The Tribunal, referring to Srishti Constructions vs. CCE & ST, held that service tax is not payable by the appellant for the period in question.

Issue No. 2:
Regarding the inclusion of free supplies of material in the assessable value, the Tribunal referred to Commissioner of Service Tax vs. Bhayana Builders (P) Ltd. The Tribunal held that the appellant is not liable to pay service tax on the value of free material supplied by the service recipient.

Issue No. 3:
The appellant had reversed the cenvat credit availed on Telecom Services before the show cause notice was issued. The Tribunal held that the appellant is entitled to the benefit of Notification No. 01/2006-ST dated 01.03.2006.

In conclusion, the Tribunal ruled in favor of the appellant on all issues. The appellant was not liable to pay service tax on the construction activities, free supplies of material, or availed cenvat credit on Telecom Services. The impugned order was set aside, and the appeal was allowed with consequential relief, if any.