2024 (6) TMI 46 - AT - Service Tax

Demand of service tax for commercial or Industrial Construction Services - for the Period prior to 01.06.2007 - rate of service tax has been increased from 2% to 4% on Works Contract Services w.e.f. 01.03.2008. Period prior to 01.06.2007 - HELD THAT - It is brought out from evidence that the appellant has rendered services in the nature of composite contracts involving both use of materials as well as rendition of services. The Hon ble Apex Court in the case of Larsen Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT has held that the composite works can be subjected to levy of service tax only under the category of Works Contract Services prior to 01.06.2007. Following the same, we are of the considered opinion that the demand under this head cannot sustain and requires to be set aside. Ordered accordingly. Rate of service tax - It is sufficiently established that the services were rendered prior to 01.03.2008. For the relevant period, prior to 2011, the date on which the invoice is raised or the service is rendered is to be reckoned for application of the rate of service tax. Thus, the rate applicable would be 2%. The appellant has already discharged service tax applying the rate of 2%. Therefore, the differential demand of service tax cannot sustain. The same is set aside. The impugned order was set aside, and the appeal was allowed with consequential reliefs, if any, as per law.

Summary

Issues Involved:
The issues involved in the judgment are:
1. Demand of service tax for the period prior to 01.06.2007 under the category of commercial or Industrial Construction Services.
2. Demand of service tax alleging an increase in the rate from 2% to 4% w.e.f. 01.03.2008.

Issue 1:
The appellant, registered under Works Contract Services, was found to have not paid service tax for the period from 16.06.2005 to 30.05.2007. The Department categorized the services as 'completion or finishing services' falling under 'Commercial or Industrial Construction' or 'Construction of Complex Service'. The appellant was held liable to pay Rs.1,06,055/- as service tax for this period. The appellant contended that as per the Show Cause Notice, the works involved use of materials and services, thus falling under Works Contract Service. Citing the case of Commissioner Vs. Larsen & Toubro Ltd., it was argued that demand prior to 01.06.2007 cannot be sustained. The Tribunal agreed, setting aside the demand under this head.

Issue 2:
During March 2008 to September 2008, the appellant paid service tax at 2% on Works Contract Services, while the rate was 4% from 01.03.2008. The Department alleged a short payment of Rs.32,199/-. The appellant argued that services were provided and invoices issued before 01.03.2008, thus the 2% rate should apply. Citing relevant case laws, it was contended that the differential demand cannot be upheld. The Tribunal concurred, setting aside the differential demand of service tax. The impugned order was set aside, and the appeal was allowed with consequential reliefs, if any, as per law.