2020 (8) TMI 739 - AT - Service Tax

Classification of services - job of metal spreading for supply uncoursed black Trap Rubble stone and its spreading/dressing along the outer edge of bund for formation of toe wall land filling the trenched with stones above ground level, constructing the pitching above toe line, using stones or filling at various cuts in bunds and dressing of entire bund slope, before metal spreading - whether classifiable as works contract, construction service formation service or as site formation and clearance and excavation, earthmoving services? - extended period of limitation. HELD THAT - As per the facts of the case, the service provided by the appellant is the supply of various materials and construction of bunds. With the said material bunds were created by the appellant for the Service recipient viz. M/s. Archelean Chemical Private Limited. The said bunds are used for production of Salt from the sea water. It can be seen that the contacts is for the construction of bunds which includes various services such as supply of uncoursed black trap rubble stone and its spreading/dressing, worth filling at various trenches and bunds and dressing of entire bunds slope before metal spreading. As regard the rate of the job it is bifurcated into the labour work and metal spreading. This clearly shows that the appellant have not only provided the service of construction of bunds but also supplied the vital material such as un-course, black trap rubble stone and other material, therefore, it is a composite work of Works Contract which includes supply of material and construction of bunds. It is also undisputed that the service recipient is a commercial organization who are doing business trading of Salt which is produced in the bunds constructed by the appellant. Therefore, the service is clearly falling under the category of Industrial Commercial Construction Service. This service is specified under Works Contract Service. In the present case since the appellant have admittedly supplied the material there is a transfer of property of the said material. The overall construction job subjected to payment of VAT which was paid by their service recipient under Reverse Charge mechanism. The appellant in this regard submitted various documents which shows that the job undertaken by the appellant has suffered VAT liability. The overall work is of construction of bunds which falls under Industrial Commercial Construction Service. The said construction is undisputedly of an immovable property. With this fulfilment of the criteria, the service is squarely covered under the category of Works Contract Service. Time Limitation - HELD THAT - There is no dispute in the fact that this is not a case where the appellant have not paid the Service tax at all. The appellant on the same services had been discharging the service tax regularly and they were filing the periodical returns in ST-3 form therefore, there is absolutely no suppression of facts on the part of the appellant - there is no suppression of facts on the part of the appellant. Hence, the demand for the longer period is not only liable to be set aside on merit but also on time bar. Thus, the services provided by the appellant merits classification under Works Contract Service and the claim of the revenue in classifying such service under Site Formation Clearance, Excavation and Earth Moving, demolition Service is rejected - appeal allowed.

Issues Involved:
1. Classification of services provided by the appellant.
2. Applicability of the larger period of limitation for the demand of service tax.
3. Validity of the differential service tax demand and associated penalties.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Appellant:
The core issue revolves around whether the services provided by the appellant should be classified under "Site Formation and Clearance, Excavation, and Earth Moving Services" as contended by the department, or under "Works Contract Service" as claimed by the appellant. The appellant argued that the work awarded involved a composite job including supply of materials and construction activities, which should be classified as a works contract. The appellant emphasized that the activities included supply of uncoursed black trap rubble stone, excavating trenches, constructing pitching above the toe line, and dressing the entire bund slope before metal spreading. The appellant asserted that since VAT was paid on the materials supplied, the service should be classified under Works Contract Service. The tribunal agreed with the appellant, noting that the contract involved both supply of materials and construction of bunds, which are immovable properties used for commercial purposes (salt production). Therefore, the tribunal concluded that the services fall under the category of Industrial & Commercial Construction Service, which is specified under Works Contract Service.

2. Applicability of the Larger Period of Limitation:
The appellant argued that the invocation of the larger period of limitation was not applicable as all relevant details were declared to the service tax department, and service tax was regularly discharged and declared in ST-3 returns. The tribunal agreed, noting that there was no suppression of facts by the appellant. The appellant had a bona fide belief regarding the classification of the service under Works Contract, supported by a favorable order from the Commissioner (Appeals) for a subsequent period. Consequently, the tribunal found that the demand for the longer period was not justified both on merits and on the grounds of time bar.

3. Validity of the Differential Service Tax Demand and Associated Penalties:
The department had issued a show cause notice demanding differential service tax, along with equal penalty and other penalties under sections 76 & 77, and applicable interest under Section 75. The tribunal, after analyzing the contracts and the nature of the services provided, concluded that the services were rightly classifiable under Works Contract Service and not under Site Formation Services. The tribunal also observed that the appellant's case for the subsequent period had been decided in their favor by the Commissioner (Appeals), and the order had attained finality as it was not appealed against by the Revenue. Given the classification under Works Contract Service, the tribunal set aside the impugned order demanding differential service tax and associated penalties.

Conclusion:
The tribunal held that the services provided by the appellant merit classification under "Works Contract Service," rejecting the Revenue's claim of classifying such services under "Site Formation, Clearance, Excavation, and Earth Moving, Demolition Service." Consequently, the appeal was allowed, and the impugned order was set aside.

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