2024 (6) TMI 248 - AT - Service Tax

Classification of services - Commercial or Industrial Construction Service or Works Contract Service? - construction undertaken by the appellant of the Cuisine Centre-cum-Job Training Institute in the Ethnic Tourist Complex in Chamkaur Sahib - composite services - HELD THAT - The demand of service tax under the category of Commercial or Industrial Construction Services is not sustainable in view of the fact that the services rendered by the appellant were composite in nature involving provision of services and supply of the material which is evident from the work register maintained by PWD themselves. It is also found that the appellant has been paying sales tax on the material used in the execution of the work contract. Further, it is found that the appellant also provided materials such as bricks, cement, plaster, windows, pipes, cast iron shoe, paint etc in the execution of the work contract. It is a settled law that the composite contracts are classifiable only under the taxable category of Works Contract Service - Tribunal in the case of Prime Developers Limited vs. CCE 2018 (9) TMI 1149 - CESTAT CHENNAI , deciding the case under similar circumstances, has held ' For activities of construction of new building or civil structure or new residential complexes involving indivisible composite contract, such services will require to be exigible to service tax liabilities under Works Contract Service as defined under section 65(105)(zzzza) ibid.' The impugned order is not sustainable in law and is set aside - appeal allowed.

Summary

Issues:
- Whether the demand of service tax under the category of 'Commercial or Industrial Construction Services' is sustainable?
- Whether the services provided by the appellant were composite in nature involving provision of services and supply of material?
- Whether the appellant's contracts should be classified under 'Works Contract Service' rather than 'Commercial or Industrial Construction Services'?
- Whether the impugned order confirming the demand of service tax, interest, and penalty is sustainable in law?

Analysis:

The judgment by the Appellate Tribunal CESTAT Chandigarh involved an appeal against an order confirming the demand of service tax, interest, and penalty imposed by the Commissioner (Appeals). The appellant, a government contractor engaged in construction and maintenance services, was alleged to have provided 'Commercial or Industrial Construction Services' for a specific project. The appellant argued that the services rendered were composite in nature, including both services and supply of materials, as evidenced by the works register maintained by the Public Works Department (PWD).

The appellant contended that the contracts should be classified under 'Works Contract Service' rather than 'Commercial or Industrial Construction Services.' They highlighted that no separate charges were levied for materials used, and sales tax was paid on the materials, indicating the composite nature of the contracts. The appellant also provided various materials in addition to services like Earth Excavation, Centering, Shuttering, and Cement lying.

The Tribunal, after considering submissions from both parties, found that the demand of service tax under 'Commercial or Industrial Construction Services' was not sustainable. The Tribunal noted that the appellant had been paying sales tax on materials used and that composite contracts should be classified under 'Works Contract Service.' Citing precedents and settled law, the Tribunal emphasized that composite contracts are taxable only under 'Works Contract Service.'

Referring to a specific case, the Tribunal reiterated that services provided under composite works contracts cannot be classified as 'Commercial or Industrial Construction Services' post a certain date. Therefore, the impugned order confirming the demand of service tax, interest, and penalty was set aside, allowing the appeal of the appellant with consequential relief as per law. The judgment emphasized the importance of correctly classifying contracts based on their composite nature and applicable tax categories.