2022 (9) TMI 1158 - AT - Service Tax

Non-payment of appropriate service tax - Commercial Industrial Construction service - Construction of Residential Complex Service - Works Contract Service - Consulting Engineer Services - Supply of tangible goods service. Construction works - HELD THAT - Admittedly for the construction works, the appellant was not only providing services but was also providing the material. The submission of learned counsel for the appellant is that such a service provided by the appellant would be covered under the works contract service w.e.f. 01.06.2007, as was held by the Supreme Court in COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT where it was held that Works contract were not chargeable to service tax prior to 1.6.2007 - thus, demand not sustainable. Period upto 30.05.2007 - HELD THAT - Annexure-IX to the show cause notice has divided the services provided by the appellant into two categories. The first is under construction service upto 30.05.2007 and the second is under the works contract service for the remaining period of the demand. Works contract service became taxable w.e.f. 01.06.2007 - It is not in dispute that the appellant was providing services as well as materials. In such circumstances, the service could not have been confirmed under any category except works contract which service became taxable only w.e.f 01.06.2007. Thus, confirmation of the demand under CICS and CCS prior to 01.06.2007 cannot be sustained. Period post 01.06.2007 - HELD THAT - The demand has been proposed in the show cause notice under works contract but it has been confirmed under CICS or CCS. It is a settled law that the demand proposed under a particular category cannot be confirmed under a different category. Consulting engineer service - submission of the learned counsel for the appellant is that it should have been confirmed on the amount of Rs. 1,19,96,452/- which was actually realized/received during period in issue and not on the basis of gross billing of Rs. 1,58,08,357/- - HELD THAT - This submission of learned counsel for the appellant deserves to be accepted for the reason that the demand could have been calculated only on the amount actually realized/received during that period. Demand in respect of supply of tangible goods service relating to Vibrators and JCB Excavators provided on rent - HELD THAT - There was a transfer of right of possession and effective control of the goods and, therefore, could not have been subjected to levy of service tax since it would amount to deemed sale under article 366(29A) of the Constitution of India. The impugned order dated 28.03.2004 passed by the Commissioner cannot be sustained and is set aside except to the extent it concerns the services provided under consulting engineer service. This issue relating to levy of service tax on consulting engineer service would have to be remitted for re-determination of the amount of service tax on Rs. 1,19,96,452/- which was the amount actually realized/received by the appellant during the period - Appeal allowed in part and part matter on remand.

Summary

Issues Involved:

1. Classification of services provided by the appellant.
2. Confirmation of service tax demand under different service categories.
3. Service tax liability calculation based on actual receipts versus gross billing.
4. Applicability of service tax on supply of tangible goods.
5. Time-barred demand and penalties.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Appellant:

The appellant was involved in providing services and materials for construction works. The department categorized these services under 'commercial or industrial construction' service (CICS) and 'construction of complex' service (CCS). However, the appellant contended that these services should be classified under 'works contract' service as per the Supreme Court's decision in Commissioner of C. Ex. & Cus., Kerala versus Larsen & Toubro Ltd., since they provided both services and materials. The tribunal agreed, noting that works contract service became taxable only from 01.06.2007, thus demands under CICS and CCS prior to this date could not be sustained.

2. Confirmation of Service Tax Demand Under Different Service Categories:

For the period post 01.06.2007, the show cause notice proposed the demand under works contract service, but the Commissioner confirmed it under CICS or CCS. The tribunal held that a demand proposed under one category cannot be confirmed under a different category, referencing decisions in Ashish Ramesh Dasarwar vs. Commissioner of Central Excise & Service Tax, Nagpur, and M/s. Choudhary Stone Crushing Company versus Commissioner of Central Excise and Service Tax - Jaipur II.

3. Service Tax Liability Calculation Based on Actual Receipts Versus Gross Billing:

The appellant argued that service tax should be calculated based on actual receipts rather than gross billing. Specifically, for 'consulting engineer' service, the demand should have been based on Rs. 1,19,96,452/- actually received, not Rs. 1,58,08,357/- billed. The tribunal accepted this argument, stating that the demand should reflect the amount actually realized.

4. Applicability of Service Tax on Supply of Tangible Goods:

The appellant provided Vibrators and JCB Excavators on rent, arguing that this involved a transfer of right of possession and effective control, thus constituting a deemed sale under article 366(29A) of the Constitution of India, and not subject to service tax. The tribunal agreed, noting that the service tax could not be levied on such transactions.

5. Time-barred Demand and Penalties:

The appellant contended that the bulk of the demand was time-barred, as the show cause notice was issued on 11.10.2012 for the period 01.04.2007 to 31.03.2012. They claimed a bonafide belief that service tax was not leviable on non-commercial entities like educational institutions and hospitals, and penalties should be waived under Section 80 of the Finance Act. The tribunal did not find it necessary to address these points specifically after deciding on the other issues.

Conclusion:

The tribunal set aside the impugned order dated 28.03.2004, except for the issue relating to 'consulting engineer' service, which was remitted for re-determination based on the actual amount received. The appeal was allowed to the extent indicated, emphasizing that demands under CICS and CCS prior to 01.06.2007 were unsustainable and that service tax should be calculated based on actual receipts. Additionally, the tribunal confirmed that supply of tangible goods involving transfer of possession and control could not be taxed as a service.