2024 (4) TMI 67 - AT - Service Tax

Classification of service - Commercial or Industrial Construction Service (CICS) or Works Contract Service (WCS) - completion and finishing services - suppression of facts or not - Extended period of limitation - HELD THAT - It is observed that in the present matter appellant claimed that service tax under works contracts came into effect w.e.f. 01.06.2007 and accordingly appellant paid service tax on gross amount of contracts under the category of works contract and duly reflected the same in ST-3 returns. Appellant paid the tax and filed ST-3 returns under the category of Works Contracts. The provisions of work contract composition scheme as well as Rule 2A of Service Tax Valuation Rules are specifically made applicable to the works contract service subject to fulfilment of various conditions so that the tax liability can be restricted only to the service portion of the contract. Admittedly no service tax can be levied on sale of goods or transfer of goods in property. In fact 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 held that prior to 1-6-2007 there is no machinery provisions for levy and assessment of service tax on indivisible works contract. The provisions of work contract composition scheme as well as Rule 2A of Service Tax Valuation Rules are specifically made applicable to the works contract service subject to fulfilment of various conditions so that the tax liability can be restricted only to the service portion of the contract. Admittedly no service tax can be levied on sale of goods or transfer of goods in property. In fact the Hon ble Supreme Court in the case of Larsen Toubro Ltd. held that prior to 1-6-2007 there is no machinery provisions for levy and assessment of service tax on indivisible works contract. The eligibility of the appellant either for the composition or for valuation under Rule 2A of the Valuation Rules are to be examined afresh by the Ld. Adjudicating Authority - it is also found that the entire amount has been confirmed without indicating the breakup of the amount attributable to the goods and services rendered by the appellant in the present matter. The impugned order is set aside - matter is remanded to the Ld. Adjudicating authority that to ascertain if VAT /Sales Tax has been paid for all the contracts under the category of works contract. If the appellant has paid VAT/Sales Tax under the head of Works Contract then Service would fall under the category of Works Contract Services. The appeal is allowed by way of remand to the Adjudicating Authority.

Summary

Issues involved:
The issues involved in this case are the classification of services rendered by M/s Crystal Metals Pvt. Ltd. under 'Commercial or Industrial Construction Service' u/s 65(25b) of the Act and 'Works Contract Services', the payment of service tax, interest, and penalties, the period of limitation for demand of service tax, and the correctness of the orders passed by the authorities.

Classification of services:
The department contended that the services provided by the appellant fell under 'Commercial or Industrial Construction Service', while the appellant argued that their services should be classified as 'Works Contract Services'. The appellant maintained that they had correctly classified their activity as 'works contract service' and discharged the applicable service tax. They cited various judgments to support their argument. The Tribunal found that the appellant had paid service tax under the category of 'works contract' and duly reflected the same in ST-3 returns. The Tribunal observed that the decision to confirm service tax liability on the whole contract value was not legally sustainable. The matter was remanded to the Adjudicating Authority to examine the eligibility of the appellant for composition or valuation under Rule 2A of the Valuation Rules.

Period of limitation and suppression of facts:
The appellant argued that the demand for service tax for the period from October 2007 to March 2012 was barred by limitation as per the proviso to Section 73(1) of the Finance Act 1994. They contended that the department was aware of their activities and thus alleging suppression of facts was not justified. The appellant also highlighted that the issue of taxability of their activity was not free from doubt during the relevant period until a judgment by the Hon'ble Supreme Court settled the matter. Therefore, they claimed that the entire demand was barred by the period of limitation provided under the Act.

Orders passed by the authorities:
The Tribunal noted that the impugned order confirmed the service tax liability without indicating the breakup of the amount attributable to goods and services rendered by the appellant. The Tribunal set aside the impugned order and remanded the matter to the Adjudicating Authority to ascertain if VAT/Sales Tax had been paid for all contracts under the category of works contract. The Adjudicating Authority was directed to consider the appellant's claims and decide the matter afresh after giving them an opportunity to support their claim with necessary documentation.