2022 (8) TMI 165 - AT - Service Tax

Short payment of service tax - Commercial or Industrial construction service - Erection Commissioning and Installation services - Site Formation Services - contract awarded to the Appellant was a turnkey contract or not - whether the work orders issued for the various works are indivisible to form a works contract or are individual services as demanded in the SCN and confirmed by the Ld. Adjudicating authority? HELD THAT - As regards the demand confirmed under the categories of Commercial or Industrial construction, Erection Commissioning and Installation services both prior to 01.06.2007 and post 01.06.2007, the same cannot be sustained and hence the demand to the extent of Rs. 19,71,44,488/- and Rs. 2,11,55,639/- under categories of Commercial or Industrial construction, Erection Commissioning and Installation services respectively is set aside. Site Formation Services - HELD THAT - The work order therein relates to land development, electrical distribution system, street lighting, Commercial hub, UGSR, OHT, WTP, Waster Conveyance system and CETP works at Vizag site. The scope of work cannot be classified under site formation services - In the case at hand, the services are not aligned to the above definition but includes set up of various other units such as WTP, CETP etc which is a composite works contract and hence the same would also merit classification under the service of works contract. Thus, the demand under site formation services cannot survive. Since the issue is already decided on merits, opinion on the point of limitation is not expressed. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:

1. Classification of services under "Commercial or Industrial Construction," "Erection, Commissioning and Installation Services," and "Site Formation Services."
2. Applicability of service tax on indivisible works contracts.
3. Time-barred demand and penalties.

Issue-wise Detailed Analysis:

1. Classification of Services:

The primary issue was whether the work orders issued for various works were indivisible to form a works contract or individual services as demanded in the Show Cause Notice (SCN). The Department determined that the Appellant had short-paid service tax under the service categories of "Commercial or Industrial Construction," "Erection, Commissioning and Installation Services," and "Site Formation Services." The Appellant argued that the contract was a turnkey contract and could not be vivisected to tax under separate service categories. The Supreme Court's judgment in CST vs. L&T Ltd. was cited, which held that indivisible works contracts could not be taxed under separate service categories. The Tribunal agreed with the Appellant, stating that the work orders were for complete work and could not be separated under different heads.

2. Applicability of Service Tax on Indivisible Works Contracts:

The Appellant contended that for the period after 01.06.2007, the demand raised under the categories of "Commercial or Industrial Construction," "Erection, Commissioning and Installation Services" could not be sustained as the indivisible works contract services could only be subjected to service tax under the category of works contract services. The Tribunal referred to the Supreme Court's observations in the L&T judgment, which clarified that composite works contracts containing elements of both transfer of property in goods and services could only be taxed under the works contract service category. Consequently, the Tribunal set aside the demand of Rs. 19,71,44,488/- and Rs. 2,11,55,639/- under the categories of "Commercial or Industrial Construction" and "Erection, Commissioning and Installation Services," respectively.

3. Time-barred Demand and Penalties:

The Appellant also argued that the demand was time-barred as it was an interpretational issue, and hence the demand along with penalties could not be sustained. However, since the Tribunal had already decided the issue on merits, it did not express an opinion on the point of limitation.

Conclusion:

The Tribunal concluded that the services rendered by the Appellant were part of indivisible works contracts and could not be classified under separate service categories as demanded in the SCN. The demand under "Commercial or Industrial Construction," "Erection, Commissioning and Installation Services," and "Site Formation Services" was set aside. The appeal was allowed with consequential relief as per law.