2023 (5) TMI 569 - AT - Service Tax

Classification of services - Works Contract Service - vivisectible composite contract or a service contract simplicitor - Revenue re-classified the services rendered from Commercial or Industrial Construction Services to works contract service - CBEC Circular No. 98/2007-ST dated 04.01.2008 - entitlement to avail the composition scheme - HELD THAT - A plain reading of the contract brings out the fact that a certain amount of material is involved and that the appellant was required to pay VAT etc. on the same and that an advance at the rate of Rs. 2400/per 1000 bricks would be paid to the appellant. It is clear that it talks of the involvement of material and it does not provide for the bifurcation of the material and service portion. Therefore, it has to be concluded that the contract is a composite one and not vivisectible and therefore, qualifies to be works contract. The department s objection that the contract is not dated will not help the cause of revenue. In view of the Hon ble Apex Court judgment in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT reiterated in M/S. TOTAL ENVIRONMENT BUILDING SYSTEMS PVT. LTD. VERSUS THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES ORS., YFC PROJECTS PVT. LTD. VERSUS UNION OF INDIA, M/S. G.D. BUILDERS VERSUS UNION OF INDIA ANR., M/S. NATIONAL BUILDING CONSTRUCTION CORPORATION LTD. (NBCC) VERSUS UNION OF INDIA ANR., M/S. UNITECH LTD. VERSUS UNION OF INDIA ORS., M/S. NATIONAL BUILDING CONSTRUCTION CORPORATION LTD. (NBCC) VERSUS UNION OF INDIA ORS., M/S. LARSEN AND TOUBRO LTD. VERSUS COMMISSIONER OF SERVICE TAX, DELHI, COMMISSIONER OF SERVICE TAX MUMBAI - II VERSUS M/S. IOT INFRASTRUCTURE ENERGY SERVICES LIMITED, M/S. L T HYDROCARBON ENGINEERING LIMITED (PREVIOUSLY KNOWN AS LARSEN TOUBRO LIMITED) VERSUS COMMISSIONER OF SERVICE TAX, MUMBAI 2022 (8) TMI 168 - SUPREME COURT , works contract are chargeable only from 01.06.2007. The appellants having opted to pay duty under the new scheme vide their letter dated 04.06.2007 have made themselves eligible for the composition scheme under works contract service. Despite the fact that the appellants have accepted in the written reply, this being a question of law can be raised at any point of time, and that Substantive benefit given by legislature cannot be nullified by mere averments of the appellant. Appeal allowed.

Summary

Issues involved: Classification of services under Works Contract Service, applicability of CBEC Circular, availability of Composition Scheme, evidentiary requirements for works contract classification.

Summary:
The case revolved around the re-classification of services by the appellants from 'Commercial or Industrial Construction Services' to 'works contract service' and the applicability of the Works Contract Composition Scheme. The Department contended that the re-classification was not permissible post a certain date as per CBEC Circular No. 98/2007-ST. A show cause notice was issued, confirming service tax liability along with penalties. The Commissioner (Appeals) upheld the decision.

The appellant argued that their services involved both material and service, correctly falling under Works Contract Service from a specific date. They cited legal precedents to support their classification and challenged the binding nature of the CBEC circular. The Department countered, highlighting inconsistencies in the appellant's submissions and lack of corroborative evidence regarding the nature of contracts.

Upon review, the Tribunal analyzed the contract terms, noting the involvement of material and the absence of a clear separation between material and service components, leading to the conclusion that the contracts were composite in nature and qualified as works contracts. The Tribunal also emphasized that the Department's objection regarding the absence of contract dates was not substantial, as the contract itself and supporting documents confirmed the works contract nature.

Additionally, the Tribunal addressed the appellant's admission of reclassification error, asserting that legislative benefits cannot be negated by mere admissions. Ultimately, the appeal was allowed in favor of the appellants, based on the contract analysis and legal interpretations provided.

The judgment, delivered on 12.05.2023, resolved the issues surrounding the classification of services, the impact of the CBEC circular, eligibility for the Composition Scheme, and the evidentiary requirements for works contract classification.