2020 (4) TMI 78 - AT - Service Tax

Validity of SCN - demand confirmed under Construction of complex service whereas the nature of activity carried out by the appellant was in the nature of works contract - Nature of advance receipt - HELD THAT - It was not permissible for the Revenue to issue a notice demanding service tax under construction of complex services as defined under section 65 (105) (zzzh) of the Finance Act, 1994 when the nature of activity was of works contract - a demand of service tax under a particular category could not have been confirmed under a different category - the demand of service tax could not have been confirmed under works contract when the show cause notice was issued under construction of complex services . Benefit of advances from the taxable values of service tax - rejection for the reason that the taxable value of service provided by the party did not tally with the balance sheet figures and, therefore, service tax liability was required to be calculated as per the balance sheet figures available on record - HELD THAT - No reason has been assigned by the Principal Commissioner as to why the certificate of the Chartered Accountant was not accepted. It is clear that instead of considering the actual advances received during a particular year, the Principal Commissioner has computed taxable value on the closing balance of advances as appearing in the balance sheets. Learned Representative for the assessee has stated that under this head excess demand of ₹ 3,49,553/- due to inclusion of advances has to be set aside and, therefore, the rest of the demand of ₹ 8,69,022/- can be confirmed. There are force in the contention of the learned Representative of the assessee. The excess demand of ₹ 3,49,553/- due to inclusion of advances is set aside. Appeal allowed in part.

Summary

Issues:
1. Appeal against demand of service tax under different categories than the nature of activity.
2. Extension of benefit of advances from taxable value of service tax.
3. Applicability of decision of Larger Bench of Tribunal in a specific case.

Analysis:
1. The appellant challenged the demand made under "complex construction services" when the activity was a "works contract." The Tribunal noted that a works contract is distinct from a service contract and can only be subjected to service tax from a specific date. Referring to various decisions, including M/s. Jambeshwar Construction Co and M/s. Choudhary Stone Crushing Co., the Tribunal held that a demand under one category cannot be confirmed under a different category. The Tribunal accepted the appellant's submission that the demand under the incorrect category should be set aside, leading to the setting aside of the demands in two appeals. The Tribunal also highlighted the importance of specific provisions for taxing works contracts and service contracts separately.

2. In the appeal related to the extension of the benefit of advances from the taxable value of service tax, the appellant contended that the Principal Commissioner erred in calculating the service tax liability based on the closing balance of advances instead of actual advances received. The Tribunal agreed with the appellant, setting aside the excess demand due to the inclusion of advances. The rest of the demand was confirmed after considering the discrepancies in the calculations and the certificate of the Chartered Accountant, which was not initially accepted by the Principal Commissioner.

3. The Department filed appeals against the orders primarily concerning the applicability of the decision of the Larger Bench of the Tribunal in a specific case. The Tribunal noted that the decision of the Larger Bench was ultimately confirmed by the Delhi High Court and the Supreme Court dismissed the Department's appeal. Consequently, the appeals filed by the Department were liable to be dismissed. The Tribunal upheld the decisions in favor of the appellants in two appeals and dismissed the appeals filed by the Department.