2024 (3) TMI 498 - AT - Service Tax

Eligibility for abatements under N/N. 15/2004 dated 10.09.2004 and N/N. 1/2006 dated 01/03/2006 - Maintenance and Repair service - Commercial or Industrial Construction Service - Erection Installation and Commissioning Service - Extended period of limitation - penalty - HELD THAT - All these services have been rendered with materials. In respect of the cases where Repair and Maintenance service was done without materials, the appellant has charged service tax on the full value without claiming any abatement. This is evident from the findings recorded by the adjudicating authority in the Order-in Original. Hence, it is observed that the correct classification of the services rendered by the appellant would be Works Contract Service which was brought under ambit of service tax only with effect from 01.06.2007. Hence, the services rendered by the appellant prior to 01.06.2007 are not liable to service tax as held by the Hon'ble Supreme Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT . Accordingly, the demand of service tax confirmed in the impugned order under the categories of Maintenance and Repair service, Commercial or Industrial Construction Service, provided with material, is not sustainable. In respect of the cases where Repair and Maintenance service was done by the appellant without materials, they have charged service tax on the full value without claiming any abatement. In respect of all these services, the appellant has collected the service tax from their clients under the category of Maintenance and Repair service, Commercial or Industrial Construction Service and paid the same to the Department. Hence, the service tax collected and paid by them to the Department is not liable for refund to them. Accordingly, the demand of service tax confirmed on the appellant up to 01.06.2007 is not sustainable on merits. After 01.06.2007 also, there is no demand made in the notice under the category of Works Contract Service . Hence, the demands confirmed under Maintenance and Repair service, Commercial or Industrial Construction Service and Erection Installation and Commissioning Service for the period after 01.06.2007 is not sustainable. However, since the appellant has collected the service tax and paid the same to the Department, they are not entitled for the refund of the service tax already paid by them. Time Limitation - HELD THAT - The audit of the records of the appellant was conducted in November 2006 and the Show Cause Notice demanding service tax for the period April 2003 to September 2007 was issued only on 21.10.2008, by invoking the extended period of limitation. The appellant is registered with the Department in November 2004. Audit was also conducted in November 2006. Thus, we find that most of the demand raised are beyond the normal period of limitation - the demand, if any, within the normal period of limitation, is also not sustainable. Penalties - HELD THAT - Appellant have paid service tax along with education cess amounting to Rs. 44,06,274/-immediately after the non-payment was pointed by audit. They have also paid late fee of Rs.14,000/- @Rs.2000/- per return. The appellant has calculated the above tax liability after availing the abatements provided under Notification No. 15/2004 dated 10.09.2004 for Maintenance and Repair service and Notification No. 1/2006 dated 01/03/2006 for Commercial or Industrial Construction Service, as they have provided such services with materials. In respect of the cases where Repair and Maintenance service was done without materials, the appellant has charged service tax on the full value without claiming any abatement. Thus, the notice itself need not have been issued as per the provisions of Section 73(3) of the Finance Act, 1994. Accordingly, the penalties under Sections 76, 77 and 78 of the Finance Act, 1994 confirmed in the impugned order is not sustainable. The impugned order is set aside - appeal allowed.

Summary

Issues involved: Classification of services for service tax liability, applicability of abatements, demand of service tax, penalties imposed, limitation period for raising demand.

Classification of services for service tax liability: The appellant provided Maintenance and Repair service, Commercial or Industrial Construction Service, and Erection Installation and Commissioning Service with materials. The correct classification of these services would be 'Works Contract Service,' which was taxable only from 01.06.2007. Therefore, services provided before this date were not liable for service tax as per a Supreme Court ruling. The demand of service tax confirmed for services provided with materials before 01.06.2007 was deemed unsustainable.

Applicability of abatements: The appellant charged service tax on the full value for Repair and Maintenance services done without materials, without claiming any abatement. They collected and paid service tax for services provided with materials under Maintenance and Repair service and Commercial or Industrial Construction Service. The service tax collected and paid by the appellant was not eligible for refund.

Demand of service tax: The Department issued a Show Cause Notice demanding service tax, interest, and penalties. The appellant contested the demand, arguing that they had already paid more than the service tax liability. The Tribunal found that the demand for services provided with materials before 01.06.2007 was not sustainable on merits.

Penalties imposed: The appellant paid the service tax promptly after audit findings and late fees for delayed returns. The Tribunal held that the penalties imposed under Sections 76, 77, and 78 of the Finance Act, 1994 were not sustainable, as the notice need not have been issued as per statutory provisions.

Limitation period: The audit was conducted in November 2006, and the Show Cause Notice was issued in October 2008, beyond the normal period of limitation. The Tribunal concluded that most of the demands raised were beyond the limitation period, making them unsustainable.

Judgment: The Tribunal set aside the impugned order and allowed the appeal filed by the appellant, ruling in their favor on the classification of services, applicability of abatements, demand of service tax, penalties imposed, and limitation period for raising the demand.