2020 (5) TMI 34 - AT - Service Tax

Levy of Service Tax - Commercial or Industrial Construction Service - composite works contract - period during August 2005 - HELD THAT - The works executed by the appellant is composite in nature involving both supply of goods as well as rendering of service. The department has agreed that the appellant s activity is covered by Works Contract Service for the period subsequent to 1.6.2007. The Hon ble Supreme Court in the case of Commissioner of Central Excise Customs Kerala Vs Larsen Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT has held that activities which gets covered under Works Contracts Service w.e.f. 1.6.2007 cannot be classified under any other service for the period prior to 1.6.2007 - Ratio of the said judgment is squarely applicable in the present case. Appeal allowed - decided in favor of appellant.

Summary

Issues: Classification of service for levy of service tax - Works Contract Service vs. Commercial or Industrial Construction Service.

The case involved a dispute regarding the classification of services provided by the appellants for the levy of service tax. The appellants, engaged in the manufacture and trading of wooden cupboards and storage units, were registered under Commercial or Industrial Construction Service (CICS) but did not charge service tax on this category until June 2007. The issue arose when the department proposed a demand of service tax under the category of Commercial or Industrial Construction Service for the period from 2005 to 1.6.2007. The original authority held that the activities did not fall under Works Contract Service (WCS) but under CICS, confirming the demand, interest, and penalty. The appellant contended that their activities were of a composite nature involving both goods and services, falling under Works Contracts Service, as accepted by the department post 1.6.2007.

The appellant argued that their activities should be classified as Works Contracts Service since they involved both the supply of goods and the rendering of services. They pointed out that post 1.6.2007, they had obtained registration under WCS category for discharging service tax, which was accepted by the department. The appellant relied on a Supreme Court judgment in the case of CCE & Cus., Kerala Vs Larsen & Toubro Ltd., which held that activities falling under composite nature of contracts were not subject to service tax levy prior to 1.6.2007. The appellant's consultant emphasized the composite nature of the contracts to support their position.

The department, represented by Ms. K. Komathi, supported the findings of the impugned order, which classified the appellant's activities under CICS rather than WCS. However, upon perusal of the records and considering the submissions from both sides, the Tribunal found that the works executed by the appellant were indeed composite in nature, involving both the supply of goods and the rendering of services. The Tribunal noted that the department had acknowledged the appellant's activities as falling under Works Contract Service post 1.6.2007. Citing the Supreme Court judgment in the case of Commissioner of Central Excise & Customs, Kerala Vs Larsen & Toubro Ltd., the Tribunal held that activities falling under WCS from 1.6.2007 onwards could not be classified under any other service for the period before that date. Consequently, the Tribunal allowed the appeal, setting aside the impugned order, and granted the department's application for the change of cause title.

In conclusion, the Tribunal's decision clarified the classification of the appellant's services for the levy of service tax, establishing that the activities were rightly categorized under Works Contract Service, in line with the Supreme Court precedent and the composite nature of the contracts involved.