2023 (11) TMI 1168 - AT - Service Tax

Classification of services - composite works contract or not - whether the collaboration agreement is for rendering commercial or industrial construction service or commercial or industrial construction service - HELD THAT - It is not in dispute that the impugned order has given abatement to the appellant so as segregate the goods portion of the contract with the service portion. The activity performed by the appellant would, therefore, classify as works contract. The finding recorded by the Additional Director to the contrary cannot be sustained. Such being the position, no service tax could have been demanded from the appellant prior to 01.06.2007 and for the period post 01.06.2007 the demand of service tax cannot be sustained for the simple reason that the show cause notice alleged that the appellant had rendered commercial or industrial construction service and the Adjudicating Authority has also confirmed the demand under this head. Such being the position, it is not possible to sustain the order dated 30.11.2016 passed by the Additional Director - impugned order set aside - appeal allowed.

Summary

Issues: Classification of services as works contract service or commercial/industrial construction service under the Finance Act, 1994.

The appellant, engaged in developing commercial and residential projects, entered into agreements with landowners for construction. A show cause notice was issued proposing service tax on transactions, alleging provision of commercial/industrial construction service. The appellant contended that the services were composite works contracts involving goods and services, citing a Supreme Court decision. The Additional Director held the services did not qualify as works contract service but as commercial/industrial construction service.

The appellant argued that the services involved both goods and services, qualifying as works contract service as per the Supreme Court decision. The authorized representative for the department supported the Additional Director's order, stating it did not require interference. The Tribunal noted that the impugned order provided abatement to segregate the goods and service portions, classifying the activity as works contract. Therefore, the demand for service tax prior to 01.06.2007 and post that date was not sustainable as the show cause notice and Adjudicating Authority confirmed the demand based on commercial/industrial construction service, not works contract service.

Conclusively, the Tribunal set aside the order passed by the Additional Director, allowing the appeal as the services rendered by the appellant were classified as works contract, and the demand for service tax was not valid based on the misclassification by the Adjudicating Authority.