2023 (8) TMI 406 - AT - Service Tax

Demand of service tax - erection, commissioning or installation service - transportation of goods service - benefit of N/N. 01/2006-ST denied - exclusion of cost of the goods as reflected under the profit and loss account from the total contract value to arrive at the taxable value - HELD THAT - Both sides agree that all the contracts which the appellant assessee entered into were composite contracts which involved both supply of goods and rendering services. It has been held by the Supreme Court in COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT that contracts involving both supply of goods and rendering services are works contracts which are a separate species of contract known to the trade distinct from the contracts of sale of goods or contracts for providing services. These contracts are chargeable to service tax only from 01.06.2007 under the head of works contract service under Section 65 (105) (zzzz) and not under any other head. It also needs to be noted that not all works contract are covered under this head but only certain types of contracts are covered. Therefore, the demand on composite works contracts under the head of erection, commissioning and installation service under Section 65 (105) (zzb) and on transportation of goods by service under Section 65 (105) (zzb) in the impugned order cannot be sustained. The impugned order is, accordingly, set aside - Appeal of assessee allowed.

Summary

Issues Involved:
The issues involved in this case are the confirmation of demand on specific services, imposition of interest and penalties, and the dropping of part of the demand by the Commissioner.

Confirmation of Demand on Specific Services:
The appellant and the Revenue challenged the impugned order passed by the Commissioner of Service Tax, Delhi. The Commissioner confirmed the demand of Service tax for the period 2007-08 to 2011-12 against the appellant for providing taxable services without payment of appropriate Service tax. The demand was confirmed for specific services, while part of the demand was dropped as not maintainable under the Finance Act, 1994. The Commissioner imposed penalties for suppression of facts and non-filing of requisite returns.

Imposition of Interest and Penalties:
Interest on the confirmed service tax amount was also imposed by the Commissioner. Penalties were levied under Section 78 for suppression of facts with the intent to evade tax, and under Section 77 for not filing requisite returns and contravening provisions of the Finance Act, 1994. No penalty was imposed under Section 76.

Dropping of Part of the Demand:
The appellant was engaged in supplying and fixing signages for clients under composite contracts. The Commissioner excluded the cost of goods from the total contract value to calculate the taxable value for service tax. The demand was made under the category of erection, commissioning, or installation service. However, both the appellant and the Revenue agreed that the contracts were composite contracts involving both supply of goods and services, falling under the category of works contracts. The Supreme Court precedent established that such contracts are chargeable to service tax under the head of works contract service from 01.06.2007. Therefore, the demand on composite works contracts under specific heads in the impugned order was deemed unsustainable.

Final Decision:
The Tribunal set aside the impugned order, allowing the appellant's appeal and dismissing the Revenue's appeal. Consequential relief was granted to the appellant.