2022 (9) TMI 1004 - AT - Service Tax

Levy of Service tax - commissioning and installation services - composite works contract - separate species of contracts known to trade or not - HELD THAT - It is undisputed that the contracts which the respondent had entered into involved both rendering of services and supply/ deemed supply of goods while rendering the services. Such services are composite contracts and are classifiable as works contract which, according to Gannon Dunkerley Co. 1992 (11) TMI 254 - SUPREME COURT is a subject species of contract. Revenue s objection that Gannon Dunkerley Co. judgment was rendered in a matter dealing with sales tax and, hence, should not apply to decide whether a service is a works contract service cannot be accepted. Whether it is a question of sales tax or service tax, the nature of the contract, i.e., whether it is for supply of goods or for rendering services or a combination of both does not change. Wherever there is a composite contract it is a works contract service. Such services can be classified only under the head of works contract service w.e.f. 01.07.2012 under section 65 (105) (zzzza) and were not taxable prior to this date as per the judgment of Supreme Court in Commissioner of Central Excise Customs, Kerala versus Larsen Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT Since the entire period in this case was prior to 01.07.2012, the services rendered by the respondent were not taxable. The contention of the Revenue that even works contract should be classified as ECIS because it is a most specific service cannot be accepted for the simple reason works contracts cannot be treated as services simplicitor which are classifiable under various sub-clauses of clause 105 of section 65. The respondent was not liable to pay service tax on the services in dispute and the impugned order is correct and proper and calls for no interference - Appeal of Revenue dismissed.

Summary

Issues:
Appeal against dropping proceedings in a service tax case based on classification of services under ECIS or works contract service.

Analysis:
The appeal was filed by the Revenue challenging the dropping of proceedings against the respondent based on the order-in-original issued by the Principal Commissioner of Service Tax. The respondent, registered for ECIS, was providing services prior to registration that were deemed classifiable under ECIS. The respondent argued that the services provided were composite work contracts involving both goods supply and services, thus not liable for service tax under ECIS.

The Commissioner, relying on the Supreme Court judgment in Gannon Dunkerley & Co. case, held that composite works contracts are a distinct category not subject to service tax under any other category. The Revenue raised several grounds in their appeal, including the timing of the respondent's claim, lack of clarification sought from the Department, and the specific classification of ECIS over works contract services.

The Tribunal considered the submissions and found that the contracts entered into by the respondent were composite in nature, involving both goods supply and services, thus constituting works contracts. It was emphasized that the nature of the contract remains the same regardless of the tax regime, and works contracts are specifically classified as such. The Tribunal cited the Supreme Court ruling in Commissioner of Central Excise & Customs, Kerala versus Larsen & Toubro Ltd. to support the non-taxability of works contracts pre-2012.

The Tribunal rejected the Revenue's argument to classify works contracts under ECIS, stating that works contracts cannot be treated as services alone for classification purposes. Additionally, the Tribunal dismissed the Revenue's reliance on the respondent's registration under ECIS as conclusive evidence of the service nature. Ultimately, the Tribunal upheld the impugned order, ruling that the respondent was not liable for service tax on the disputed services, and dismissed the Revenue's appeal.

In conclusion, the Tribunal's decision clarified the classification of composite works contracts as distinct from ECIS, emphasizing the non-taxability of such contracts pre-2012 and rejecting the Revenue's arguments regarding classification and registration.