2023 (7) TMI 51 - AT - Service Tax

Levy of Service Tax - dredging service - Consulting engineer service - Commercial and Industrial Construction Service - Consulting Engineer Service (import of services) - Goods Transfer Agency Service - period involved in the said case was up to June 2005 - Extended period of limitation - penalty. Dredging service - contract for Construction of Weir on River Krishna downstream of Srisailam Dam in roller compacted concrete by Andhra Pradesh Power Generation Corporation Limited - HELD THAT - It is a case of works contract, which specifically brought into the statute book with effect from 01.06.2007. Even prior to such effective date, the services involving both provision of service and supply of goods on payment of VAT shall not fall under the category of any other defined taxable service and same should be considered as works contract service only - the Hon ble Supreme Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT have held that irrespective of classification of service, when the service involves supply of goods on payment of VAT, the same should be classified as works contract service alone. Since, the construction activity provided by the appellant was for the period June 2005, the same cannot be liable for payment of service tax inasmuch as works contract service was brought into the taxing net with effect from 01.06.2007. Therefore, the service tax demand of Rs.3,22,401/- confirmed in the impugned order cannot be sustained. Consulting engineer service - HELD THAT - During the course of investigation, the appellants vide their letter dated 15.07.2006 had confirmed regarding payment of service tax in respect of the services provided to M/s Pratibha Industries Limited. Further, during the course of adjudication and in the appeal memorandum filed before the Tribunal, the appellants have not specifically contested such demand confirmed in the impugned order. Thus, such demand of Rs.2,31,397/- confirmed in the impugned order is sustainable and the appeal filed by the appellants to such extent is liable for dismissal. Commercial and Industrial Construction Service - HELD THAT - The services provided by the appellants involved both execution of the assigned work as well as for supply of material. It is also an admitted fact that the materials used in the execution of the work were procured by the appellants on payment of appropriate VAT/Sales Tax. Thus, it is evident that the service provided by the appellants should be categorized as works contract service - Since, such services were provided by the appellants prior to the period 01.06.2007, as per the ratio of the judgment of Hon ble Supreme Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT , no service tax demand shall be fastened on the appellants. Hence, an amount of Rs.4,27,623/- confirmed in the impugned order cannot be sustained. Consulting Engineer Service (import of services) - Goods Transfer Agency Service - HELD THAT - The appellants are not contesting such demands confirmed in the impugned order. However, the appellants have pleaded that imposition of penalties in the impugned order cannot be sustained, since there was reasonable cause for non-payment of service tax by the appellants. Extended period of limitation - penalty - HELD THAT - There was ambiguity with regard to payment of service tax by the recipient of the said services, under reverse charge mechanism. There were also divergent views expressed by the judicial forums with regard to payment of service tax by the person, other than the service provider. Since, the appellants have accepted their liability; this is a fit case for invocation of the provisions of Section 80 ibid for non-imposition of penalties. Therefore, the penalties imposed in the impugned order under Sections 76, 77 and 78 ibid are liable to be set aside. Appeal allowed in part.

Summary

Issues involved: Determination of service tax liability on Commercial or Industrial Construction Service, Construction of Complex Service, Consulting Engineer Service, and Goods Transfer Agency Service.

Regarding dredging service: The appellants were awarded a contract for construction work involving supply of goods before the effective date of works contract service taxation. Citing the Supreme Court judgment, the Tribunal held that service tax demand for this service cannot be sustained.

Regarding consulting engineer service: The demand confirmed for this service was found sustainable as the appellants did not contest it during adjudication.

Regarding Commercial and Industrial Construction Service: The service provided involved both execution of work and supply of material, which was procured by the appellants on payment of VAT. The Tribunal categorized this service as works contract service and held that no service tax demand can be imposed as it was provided before the relevant taxation period.

Regarding Consulting Engineer Service and Goods Transfer Agency Service: The appellants did not contest the demands for these services but argued against the imposition of penalties. The Tribunal found ambiguity regarding payment of service tax by the recipient under reverse charge mechanism and set aside the penalties imposed.

Disposition: The Tribunal set aside the service tax demand for dredging service and Commercial or Industrial Construction Service but confirmed the demand for consulting engineer service, transport of goods by road services, and consulting engineer's services (import of services). The penalties imposed were set aside due to reasonable cause for non-payment of service tax.

Conclusion: The appeal was partly allowed in favor of the appellant, with the Tribunal pronouncing the order on 08.05.2023.