2022 (7) TMI 1184 - AT - Service Tax

Classification of services - designing and constructing office interiors, customized exhibitions booths/stalls, television studios and retail fit outs - services classified as erection, commissioning and installation service and commercial or industrial construction service prior to June 01, 2007 - works contract service or pandal and shamiana services - demand of differential duty along with interest and penalty - HELD THAT - It is undisputed that the services provided by the appellant were on turnkey basis and a composite amount is charged by the appellant for its services and for the goods used in providing them. It is undisputed that the appellant treated this as works contract services and paid VAT to the respective State Governments as appropriate. The appellant had classified these services with effect from 1.6.2007 under the head works contract service and had classified them under the heads of commercial or industrial construction service and erection commissioning or installation service prior to this date and paid service tax. Even while paying service tax under these heads before 1.6.2007 the appellant had claimed abatement as available under various notifications. It has been settled by the Supreme Court in the case of Larsen Toubro that composite works contract services involving supply of goods/deemed supply of goods and rendering services are a separate species of contract known to commerce and must be treated as works contract services only. Such services become taxable under the head of works contract service under Section 65(105)(zzzza) of the Finance Act, 1994 with effect from 1.6.2007. Prior to this there was no charge of service tax on works contract services. Therefore, there was no levy of service tax on such composite services under any other head before 1.6.2007. Since it is undisputed that the appellant s contract involved provisions of services as well as supply/deemed supply of goods they can only be classified under the head works contract services as per the law laid down in Supreme Court in Larsen Toubro. Such services could not have been charged with service tax under any other head either before or after 1.6.2007. The show cause notices demanding service tax under the head Pandal and Shamiana services from the appellant, therefore, cannot be sustained. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Classification of services provided by the appellant.
2. Appropriation of service tax already paid.
3. Applicability of the Supreme Court judgment in Commissioner of Central Excise & Customs Vs. Larsen and Toubro Ltd.
4. Validity of penalties imposed under Sections 75, 77, and 78 of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Appellant:
The appellant is engaged in setting up stalls for various companies at exhibitions. Initially, the appellant classified its services under "erection, commissioning and installation service" and "commercial or industrial construction service" before June 01, 2007, and as "works contract service" after June 01, 2007, following the introduction of Section 65(105)(zzzza) in the Finance Act, 1994. The Revenue issued multiple show cause notices proposing to classify the appellant's service under "Pandal and Shamiana" services and demanded differential duty. The Tribunal found that the services provided by the appellant were on a turnkey basis, involving both service provision and the supply of goods, and thus should be classified as "works contract services" in line with the Supreme Court's judgment in Commissioner of Central Excise & Customs Vs. Larsen and Toubro Ltd.

2. Appropriation of Service Tax Already Paid:
The appellant argued that the differential duty confirmed by the Commissioner did not account for the service tax already paid. The Tribunal noted that the appellant had been discharging its VAT liability and had classified its services appropriately under the applicable categories, paying the necessary taxes. The Tribunal observed that the impugned order failed to reconcile the information provided by the appellant, such as copies of ST-3 returns, details of turnover, and service tax paid, which were available with the Department.

3. Applicability of the Supreme Court Judgment in Commissioner of Central Excise & Customs Vs. Larsen and Toubro Ltd.:
The Tribunal referenced the Supreme Court's judgment in Commissioner of Central Excise & Customs Vs. Larsen and Toubro Ltd., which held that composite works contract services involving both the supply of goods and the provision of services are a distinct category that should be treated as works contract services. The Tribunal emphasized that such services became taxable under Section 65(105)(zzzza) of the Finance Act, 1994, from June 01, 2007, and could not be charged under any other head before or after this date. Consequently, the show cause notices demanding service tax under "Pandal and Shamiana services" were deemed unsustainable.

4. Validity of Penalties Imposed Under Sections 75, 77, and 78 of the Finance Act, 1994:
Given the Tribunal's conclusion that the appellant's services should be classified under "works contract services" and not under "Pandal and Shamiana services," the penalties imposed under Sections 75, 77, and 78 of the Finance Act, 1994, were also deemed unsustainable. The Tribunal set aside the impugned orders and allowed the appeals with consequential relief to the appellant.

Conclusion:
The Tribunal concluded that the appellant's services, involving both the provision of services and the supply of goods, should be classified as "works contract services" as per the Supreme Court's judgment in Larsen and Toubro. The show cause notices demanding service tax under "Pandal and Shamiana services" were not sustainable, and the penalties imposed were set aside. The appeals were allowed with consequential relief to the appellant.