2024 (2) TMI 1450 - AT - Service Tax

Classification of service - Installation of Thermal Insulation v/s works contract - transfer of property of goods is involved in the execution of the contract or not? - demand of differential service tax - whether sale of goods are only eligible for classification under works contract for the purpose of payment of service tax? - HELD THAT - Whether the activity of Installation of Thermal Insulation is classifiable under works contract service or otherwise has been settled by this Tribunal vide Final Order 2023 (1) TMI 690 - CESTAT AHMEDABAD as held from the definition of Works Contract Service, it is clear that only specified categories of works contract are considered for levy of Service Tax under the said definition. These are enumerated in clauses (a) to (e). We find that in clause (a) thermal insulation also mentioned and in the present matter appellant had also paid VAT/ sales tax on goods which is used in installation of thermal insulation. We find that the impugned activity of the assessee was nothing but works contract service . No merit in the impugned order demanding service tax from appellant. Therefore, the impugned order is set-aside. Decided in favour of assessee.

Summary

Issues:
Classification of service under Works Contract Service for Installation of Thermal Insulation; Applicability of Notification No. 01/2006 ST; Interpretation of legal provisions regarding transfer of property in goods in works contract service.

Analysis:
The case involved the appellant, a service provider engaged in providing services including thermal insulation. The appellant availed the benefit of Notification No. 01/2006 ST, which allowed for an abatement of 67% of the gross amount received from clients for services involving material and service. The dispute arose regarding the classification of the service provided by the appellant under Works Contract Service or Installation of Thermal Insulation. The Department argued that the service should be classified under Installation of Thermal Insulation, making the appellant liable to pay differential service tax.

In the appellant's defense, it was argued that a previous tribunal order in a similar case had classified the service of Installation of Thermal Insulation as works contract service. The tribunal, in its analysis, referred to the legal provisions and definitions related to works contract service. It highlighted that the appellant, as a commissioning and installation agency, had provided thermal insulating materials along with services, making them eligible for the benefits under the notification. The tribunal concluded that the appellant's service fell under works contract service based on the definition provided in the law.

The tribunal's decision was based on a clear interpretation of the law, specifically focusing on the conditions for works contract service and the eligibility criteria for the abatement under the notification. The tribunal found that the appellant's activities aligned with the definition of works contract service, including thermal insulation as one of the specified categories. Therefore, the tribunal set aside the impugned order demanding service tax from the appellant, ruling in favor of the appellant based on the settled legal precedent in their own case.

In conclusion, the tribunal's detailed analysis of the legal provisions and the precedent set in the appellant's previous case led to the decision to classify the appellant's service under works contract service for Installation of Thermal Insulation. The judgment emphasized the importance of correctly interpreting and applying the relevant laws and notifications in determining the tax liability for such services.