2023 (7) TMI 483 - AT - Service Tax

Classification of Service - Commercial or Industrial Construction Service - indivisible Composite Works Contract - appellants have carried out Construction works under a Contract with M/s SIDCUL (State Industrial Development Corporation Uttrakhand Limited) - Extended period of Limitation - HELD THAT - It is clear that the Contracts entered into by the appellant are not vivisectible between labour and material. Therefore the case of the appellants is squarely covered by the judgment in the case of COMMISSIONER CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT . The appellants have entered into composite contract with M/s SIDCUL and therefore are works contracts classifiable under Section 65 (105) (zzzza). Therefore the same are chargeable to service tax from 01.06.2007. Demand for the period January 2005 to 01.06.2007 requires to be set aside. For the period after 01.06.2007 the demand being raised and confirmed under Commercial or Industrial Construction Service cannot also be sustained as the demand was not raised under Works Contract Service. Consequentially the entire demand goes. The entire demand is not sustainable other submissions of the appellant on the issue of work being in the nature of public utilities and hence not chargeable to service tax; limitation and imposition of penalties are not relevant. Appeal allowed.

Summary

Issues involved: Determination of tax liability under Commercial or Industrial Construction Service for a construction contract involving labor and material, applicability of service tax on infrastructure development work, invocation of extended period and imposition of penalties.

Tax liability under Commercial or Industrial Construction Service:
The appellant, M/s SAB Industries Limited, appealed against an order passed by the Commissioner of Central Excise regarding the demand of Service Tax amounting to Rs.6,23,80,945/- for construction works carried out under a contract with M/s SIDCUL. The Commissioner confirmed a demand of Rs.50,71,431/- and imposed penalties under relevant sections of the Finance Act, 1994. The appellant argued that the contract was a composite works contract involving both labor and material, citing relevant case laws. The Tribunal held that the contract was indivisible and classifiable under Works Contract Service, not Commercial or Industrial Construction Service. Consequently, the demand for the period in question was set aside.

Applicability of service tax on infrastructure development work:
The appellant contended that the construction activity undertaken was for infrastructure development, such as roads, culverts, bridges, drainage systems, etc., meant for public use. They argued that commercial or industrial construction services apply to specific types of structures, relying on case law. The Tribunal agreed with the appellant, stating that the works contracts were for infrastructure development and not commercial or industrial construction, leading to the dismissal of the demand.

Invocation of extended period and imposition of penalties:
The appellant argued against the invocation of the extended period and imposition of penalties, citing no findings of wilful suppression or intent to evade tax. The Tribunal, having ruled in favor of the appellant on the tax liability issue, deemed the other submissions irrelevant. As the demand was found to be unsustainable, considerations regarding penalties, limitation, and nature of work were deemed not applicable, resulting in the allowance of the appeal.

Separate Judgement:
The appeal was allowed by the Appellate Tribunal CESTAT CHANDIGARH, with the judgment pronounced in open court on 12.07.2023 by Mr. S. S. GARG, Member (Judicial) and Mr. P. ANJANI KUMAR, Member (Technical).