2024 (6) TMI 613 - AT - Central Excise

Eligibility of abatement under N/N. 01/2006-ST dated 01.03.2006 - works executed involving supply of materials as well as rendition of services is sustainable or not - HELD THAT - From the facts, it is brought out that the appellant has rendered services which are composite in nature involving both supply of materials as well as rendition of services. The Hon ble Apex Court in the case of Larsen and Toubro Limited and Another v. State of Karnataka and Another 2013 (9) TMI 853 - SUPREME COURT has held that the contracts involving both supply of materials as well as rendition of services can be classified only under WCS. The Tribunal in the case Real Value Promoters Pvt. Ltd. 2018 (9) TMI 1149 - CESTAT CHENNAI has followed the decision in the case of Larsen and Toubro Limited and Another to hold that the demand raised under CICS, CCS, RCS for the period prior to 01.07.2012 cannot sustain when the works executed are in the nature of composite contracts. In the present case, it is brought out and established that the works are composite in nature. The demand raised denying the benefit of abatement cannot sustain. The impugned order is set aside - Appeal allowed.

Summary

Issues:
Whether the appellant is eligible for the abatement under Notification No. 01/2006 for Works Contract Services involving supply of materials and rendition of services.

Analysis:
The appellant, engaged in Works Contract Services registered as 'Interior Decorator's Service,' faced a demand for differential service tax under Interior Decorator's Services, denying abatement under Notification No. 01/2006. The appellant argued that their contracts were composite, involving both materials supply and services, falling under Works Contract Services post-01.06.2007. The appellant maintained proper tax compliance for material supply and service provision. The appellant cited the case of Real Value Promoters Pvt. Ltd., where composite contracts were classified under Works Contract Services, supporting their stance.

The Department contended that the appellant's works were akin to Interior Decorator's Services, thus ineligible for abatement. However, the Tribunal referenced Larsen and Toubro Limited's case, stating contracts with material supply and services should be classified as Works Contract Services. The Tribunal, following Real Value Promoters Pvt. Ltd. case, held that demands under different services pre-01.07.2012 for composite contracts were unsustainable.

Ultimately, the Tribunal ruled in favor of the appellant, stating that the demand denying abatement was unjustifiable. Citing the composite nature of the works, the Tribunal set aside the impugned order and allowed the appeal with any consequential reliefs.

This judgment clarifies the classification of contracts involving both material supply and services under Works Contract Services, emphasizing the applicability of abatement provisions. The decision underscores the importance of correctly categorizing composite contracts to determine tax liabilities accurately.