2024 (2) TMI 504 - AT - Service Tax

Abatement from service tax - electrical contract works to various Government Departments - indivisible/composite contract or not - subjected to TDS as per the provisions of Section 194C of Income Tax Act, 1961 or not - HELD THAT - The appellant has executed works contract involving both material and service and hence the activity is in the nature of composite works contract and therefore is covered by the ratio decision of the Hon'ble Apex court in the case of Larsen Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT wherein it is held that works contract is leviable to service tax only after 01.06.2007. Following the ratio of the Hon ble Apex Court and the subsequent catena of judgments on the issue, it is found that the appeal filed by the appellant is maintainable and hence the appeal against the confirmation of demand of service tax on Erection, Commissioning or Installation Service is allowed. As regards the benefit of Notification 45/2010-ST dated 20.07.2010, it is not necessary to decide on this issue. As regards the penalties imposed, since the demand itself is not sustainable the penalties are dropped. Demand on Rent-a-Cab service - HELD THAT - Since the appellant has not adduced any evidence to the effect that the service is used either directly or indirectly in the other services rendered by the appellant and hence the appeal in this regard is disallowed and the penalties imposed under Section 77 78 are upheld. Appeal disposed off.

Summary

Issues Involved:
1. Demand of service tax on "Erection, Commissioning or Installation Services."
2. Demand of service tax on "Rent-a-Cab Operator Service."
3. Entitlement to abatement and applicability of Notification No. 45/2010-ST.
4. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Summary:

1. Demand of Service Tax on "Erection, Commissioning or Installation Services":
The appellant, a proprietary concern engaged in electrical contract works, was issued a show-cause notice for service tax demand on "Erection, Commissioning or Installation Services." The Commissioner (Appeals) held that the services rendered by the appellant do not fall under "Works Contract" but under "Erection, Commissioning or Installation Service." The appellant argued that their services should be treated as works contracts, which are chargeable to service tax only from 01.06.2007, as per the Hon'ble Supreme Court decision in Larsen & Toubro Ltd. The Tribunal found that the appellant's activities are composite works contracts and thus covered by the Apex Court's decision, making them liable for service tax only after 01.06.2007. Consequently, the appeal against the demand of service tax on "Erection, Commissioning or Installation Service" was allowed, and the penalties were dropped.

2. Demand of Service Tax on "Rent-a-Cab Operator Service":
The Commissioner (Appeals) confirmed the demand of service tax on "Rent-a-Cab Operator Service," stating that this service was rendered separately and not connected to any other service by the appellant. The Tribunal upheld this finding, noting that the appellant failed to provide evidence that the service was used directly or indirectly in other services rendered. Therefore, the appeal regarding the demand on "Rent-a-Cab Operator Service" was disallowed, and the penalties under Sections 77 and 78 were upheld.

3. Entitlement to Abatement and Applicability of Notification No. 45/2010-ST:
The appellant argued for the benefit of Notification No. 45/2010-ST, which states that no service tax is recoverable if the service is related to the transmission and distribution of electricity. The Tribunal, however, did not find it necessary to decide on this issue due to the allowance of the appeal based on the composite nature of the works contract.

4. Imposition of Penalties:
Since the demand for service tax on "Erection, Commissioning or Installation Services" was not sustainable, the penalties related to this demand were dropped. However, the penalties concerning the "Rent-a-Cab Operator Service" were upheld due to the confirmation of the demand.

Conclusion:
The appeal was disposed of by allowing the appeal against the demand of service tax on "Erection, Commissioning or Installation Service" and dropping the related penalties. The demand and penalties related to "Rent-a-Cab Operator Service" were upheld.