2024 (2) TMI 1309 - AT - Service Tax

Classification of services - construction/development works in four ventures/ projects - to be classified under works contract service or Construction of Residential Complex Service? - HELD THAT - Post judgment in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT , CRCS would not be the appropriate classification as this was in the nature of indivisible composite contract and therefore, would be more in the nature of WCS, and since there was no appropriate head i.e., WCS, available prior to 01.06.2007, the demand for this period would fall on this ground itself. In fact, the Board has also clarified vide Circular No. 151/2/2012-ST dt.10.02.2012, that for the period prior to 01.07.2010, construction service provided by the builder/developer will not be taxable in terms of earlier Board Circular No. 108/02/2009-ST dt.29.01.2009. In other words, there would be no liability. When SCN has proposed demand under WCS post 01.06.2007, whether that demand will still sustain or otherwise? - HELD THAT - In this case, the SCN has proposed CRCS for the period up to 01.06.2007 but for the same activity, the services have been considered as WCS for the period post 01.06.2007. The rationality is that while services of CRCS continue to be specified service even beyond 01.06.2007, in view of the clear definition of WCS, it will be more appropriately classified under WCS as compared to CRCS, having recourse to Sec 65A. It is obvious that prior to 01.06.2007, there was no scope for deciding the classification, in view of the fact that CRCS was appropriately covering the activity in terms of its definition and in fact, in terms of Notification, there was a provision for exclusion of value of material involved in providing that service, so that only the service portion is charged to service tax. However, post 01.06.2007, the situation has changed where two different services heads are now available in respect of indivisible composite contract, which is not being denied by either side. For the period post 01.06.2007, it is obvious that the definition of WCS covers it more specifically as compared to the CRCS and therefore, by applying principle of classification under Sec 65A, the most specific entry for the nature of service would have been WCS and not CRCS, which existed post 2007 also. Thus, to that extent the Commissioner has not appreciated the true nature of transaction and the scope of Sec 65A and there is no bar in changing classification, especially, in cases where there is scope for classifying it more appropriately under a different classification, post introduction of the levy. Sec 65A, cannot be applied only at the threshold but it can also be applied in the event of any change in classification due to change in definition of existing service or introduction of new services, unless otherwise barred by the Act itself. Therefore, once the service is rightly covered under WCS post 01.06.2007, the next question is whether they will be entitled for exemption under Circular No.151/2/2012-ST dt.10.02.2012. Learned AR has vehemently opposed that Board Circular clarifying that no taxability on construction service for the period prior to 01.07.2010, would only be applicable in respect of construction services falling under clauses (zzq) (zzzh) of Sec 65(105) and not in respect of WCS. Therefore, there is no exemption from service tax for WCS, which is the appropriate classification. This issue has been decided by this Tribunal in favour of the Assessee in the precedent orders in the case of M/S KRISHNA HOMES VERSUS CCE, BHOPAL AND CCE, BHOPAL VERSUS M/S RAJ HOMES 2014 (3) TMI 694 - CESTAT AHMEDABAD , holding that though classifiable under WCS, no tax is payable for the period prior to 01.07.2010. There being no merit in the Appeal of Revenue - Appeal dismissed.

Summary

Issues involved:
The judgment involves issues related to the classification of services under 'Construction of Residential Complex Service' (CRCS) and 'Works Contract Service' (WCS), as well as the applicability of Board Circulars and case laws in determining the correct tax liability.

Classification under CRCS and WCS:
The main issue in the case was determining whether the services provided by the Respondent fell under CRCS or WCS during the relevant period. The Revenue contended that post judgment in a specific case, CRCS would not be the appropriate classification, and the services should be classified as WCS. The Commissioner examined the classification under Sec 65A and found that the services were more appropriately classified under CRCS rather than WCS. However, the Tribunal disagreed with the Commissioner's interpretation and held that the services were rightly covered under WCS post 01.06.2007, leading to the dismissal of the Appeal by Revenue.

Change in classification post 01.06.2007:
Another issue raised was whether the department could change the classification from CRCS to WCS post 01.06.2007. The Tribunal noted that there was no change in the nature of services provided, but a new category of service, WCS, was introduced. The Tribunal held that there was no bar in changing the classification, especially when the service could be more appropriately classified under a different category post the introduction of the levy.

Exemption under Circular No. 151/2/2012-ST:
The final issue addressed was whether the services classified under WCS post 01.06.2007 would be entitled to exemption under Circular No. 151/2/2012-ST. The Revenue argued that the exemption did not apply to WCS. However, the Tribunal referred to precedent orders and held that no tax was payable for services classified under WCS for the period prior to 01.07.2010. Consequently, the Appeal by Revenue was dismissed.

Conclusion:
The Tribunal dismissed the Appeal by Revenue, upholding the classification of services under Works Contract Service (WCS) post 01.06.2007 and affirming the entitlement to exemption under Circular No. 151/2/2012-ST for the relevant period.