2023 (2) TMI 1042 - AT - Service Tax

Levy of Differential duty - Works Contract or not - case of the Department is that the appellant is carrying out services of Repair or Maintenance and Commercial or Industrial Construction Relating to Painting on Walls, Buildings, and Sheds etc. - only ground for denial of the payment of Service Tax under the works contract by the revenue is that the same is not covered under definition of works contract. HELD THAT - The appellant admittedly carried out repairing/painting work in respect of plant, machinery, and building of their client. The service was provided along with the material used for painting work and the appellant also paid the VAT on the works contract. On reading of the definition of works contract, it is found that to cover the appellant s activity under works contract it is not necessary that the said activity should be carried out only in respect of new building. As per clause (b) in addition to construction of a new building there is another category Civil structure and part thereof primarily for the purpose of commerce or industry. This category is a very vast category, which covers the plants machinery building. The appellant has carried out the painting work on this plant, machinery, building - a civil construction or a part thereof covers the plant machinery, building on which the appellant has carried out the painting work, the same is specified under clause (b) therefore, the painting work carried out on a civil structure or part thereof and also of a pipe line or conduit and undisputedly it is for the purpose of commerce or industry. The activity of the appellant is squarely covered under the definition of works contract . The appellant have correctly discharged the Service Tax under the head of works contract - Appeal allowed.

Summary

Issues:
Interpretation of the definition of "works contract" under Section 65(105)(zzzza) of the Finance Act, 1994.

Analysis:
The case involved a dispute regarding whether the appellant's painting services on existing industrial and commercial structures fell within the definition of "works contract" for the purpose of service tax liability. The Department argued that the activities did not qualify as works contract services as they were carried out on old buildings, not new constructions. However, the appellant contended that their services fell under clause (d)(ii) of the definition, covering civil structures primarily for commerce or industry, regardless of whether they were new or existing. The appellant maintained that their painting work on plant, machinery, and buildings for commercial and industrial purposes should be considered works contract services. The Tribunal examined the definition of works contract and concluded that the appellant's activities did indeed fall within the scope of works contract services as specified under the relevant clauses of the Finance Act, 1994.

The Tribunal noted that the appellant had provided painting services along with materials and paid VAT on the works contract, indicating their compliance with tax obligations. The Tribunal emphasized that the definition of works contract did not restrict the applicability to only new constructions but also encompassed civil structures and parts thereof primarily for commerce or industry. The Tribunal highlighted that clause (d) explicitly covered completion and finishing services, repair, renovation, or similar services related to civil structures or new residential complexes. As the appellant's painting work on plant, machinery, and buildings fell within the scope of finishing services, repair, or renovation, the Tribunal concluded that the appellant had correctly discharged the service tax liability under the works contract category. Therefore, the Tribunal set aside the impugned order, allowing the appeal in favor of the appellant.

In conclusion, the Tribunal's decision clarified that the appellant's painting services on existing industrial and commercial structures were indeed covered under the definition of "works contract" as per the Finance Act, 1994. The judgment emphasized that the nature of the services provided, the purpose of the structures, and the scope of activities specified in the definition were crucial factors in determining the applicability of works contract services for taxation purposes.