2020 (10) TMI 2 - AT - Service Tax

Short payment of Service tax - Construction Services in Respect of Commercial of Industrial Building and Civil Structures and Erection Commissioning and Installation - period October, 2004 to March 2007 - HELD THAT - There is no dispute that the service provided by the appellant is otherwise specified under Works Contract Service. The criteria for qualification of Works Contract Service is that the service should be provided along with material. It is obvious that when the services on construction is provided along with the material the assessee needs to pay VAT or the Works Contract Tax. From the contract it is seen that the appellant is required to provide the service along with material like Cement, Metal, Steel Reinforcement, Sand, Charcoal, Salt and Earting Material. Moreover, in respect of the Works Contract Service the recipient of the service will deduct the Works Contract Tax which shows that the works contract service is suffered with works contract tax. As per this fact there is absolutely no doubt that the nature of service as well as facts such as service provided along with the material and it suffered works contract tax which clearly qualifies as Works Contract Service. Benefit of N/N. 01/2006-ST. - HELD THAT - As per the condition of such notification for allowing the abatement, the material cost needs to be included in the gross value of the service charges. When the revenue itself has allowed the abatement, it has admitted that the material cost is included in the gross value of the Works Contract Service. With this fact also, it is clearly established that the service provided by the appellant is Works Contract Service. As per the Hon ble Supreme Court s judgment in the case of LARSEN TOURBO LTD. 2015 (8) TMI 749 - SUPREME COURT the works contract service is not taxable before 01.06.2007 - In the present case, the entire period is prior to the said date therefore, in view of the apex court judgment the service being Works Contract Service is not taxable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Short payment of service tax by the appellant for the period October, 2004 to March 2007.
2. Dispute regarding the nature of service provided by the appellant as Works Contract Service.
3. Adjudication of penalties under Sections 76, 77, and 78 of the Act.
4. Interpretation of exemption notification No. 1/2006 and abatement of 67% from the gross value of service.
5. Applicability of the judgment in the case of COMMISSIONER v/S. LARSEN & TOURBO LTD. 2015 (39) S.T.R. 913 (SC) regarding taxation of Works Contract Service before 01.06.2007.

Analysis:
1. The appellant was engaged in providing taxable services under Construction Services and made a short payment of service tax amounting to ?4,91,497 for the period October, 2004 to March 2007. The department issued a Show Cause Notice which was adjudicated by the Adjudicating Authority confirming the service tax along with interest and imposing penalties under various sections of the Act.

2. The dispute revolved around whether the service provided by the appellant qualified as Works Contract Service. The appellant argued that the service was indeed a Works Contract Service and cited relevant judgments, including the landmark judgment in COMMISSIONER v/S. LARSEN & TOURBO LTD., to support their claim that Works Contract Service was not taxable before 01.06.2007.

3. The penalties under Sections 76, 77, and 78 of the Act were imposed by the lower authorities, and the Commissioner (Appeals) upheld these penalties in the initial appeal. However, the appellant challenged these penalties, leading to subsequent appeals and remand proceedings.

4. The interpretation of exemption notification No. 1/2006 was crucial in determining the abatement of 67% from the gross value of service. The appellant argued that the abatement could only be allowed if the material cost was included in the gross value of the service, which further supported their claim of providing Works Contract Service.

5. The final decision by the tribunal favored the appellant, setting aside the impugned order and allowing the appeal. The tribunal concluded that the service provided by the appellant qualified as Works Contract Service based on the contract terms, material provision, and the admission by the revenue in the show cause notice. The judgment in the case of LARSEN & TOURBO LTD. was cited to support the non-taxability of Works Contract Service before 01.06.2007, which was applicable to the entire period in question.