2024 (7) TMI 996 - AT - Service Tax

Failure to pay appropriate service tax - Commercial or Industrial Construction Service (CICS) - works of composite nature - period prior to 1.7.2012 - construction of a commercial complex or not - HELD THAT - As per the quantification of service tax the appellant has been given 67% abatement. This would show that the contracts are composite in nature involving supply of materials as well as rendition of services. The demand under such composite contracts can only be made under the category of WCS. The Tribunal in the case of Real Value Promoters Pvt. Ltd. 2018 (9) TMI 1149 - CESTAT CHENNAI had considered the issue as to whether the demand made under CICS / RCS / CCS can sustain for the period prior to 1.7.2012 for composite contracts. The said decision was followed by the Tribunal in the case of Jain Housing Construction Ltd. 2023 (2) TMI 1044 - CESTAT CHENNAI whereby the Tribunal set aside the demand following the decision in the case of Real Value Promoters Pvt. Ltd. The demand cannot sustain. In the result the impugned order is set aside - Appeal allowed.

Summary

Issues:
1. Whether the demand of service tax under Construction of Commercial or Industrial Construction Service for the period prior to 1.7.2012 in the case of works of composite nature is sustainable.

Analysis:
The appellant was registered under various service categories and provided services for the construction of a commercial building. The Department alleged non-payment of appropriate service tax under Commercial or Industrial Construction Service (CICS) for a specific period. A show cause notice was issued, and after due process, the demand, interest, and penalty were confirmed by the original authority and upheld by the Commissioner (Appeals).

The appellant argued that the works executed were classified under Works Contract Service (WCS) post the introduction of such services in 2007. They contended that the contracts were composite in nature, involving both material supply and service rendition, and thus, the demand should be under WCS. The appellant cited precedents where demands under CICS for composite contracts were set aside by the Tribunal and upheld by the Hon'ble Apex Court. The Department's appeal against such decisions was dismissed by the Hon'ble Apex Court.

The issue to be decided was whether the demand of service tax under CICS for composite contracts prior to 1.7.2012 was sustainable. The Tribunal considered previous decisions and found that demands under CICS for composite contracts were not valid before 1.7.2012. Citing cases like Real Value Promoters Pvt. Ltd. and Jain Housing & Construction Ltd., where demands under CICS were set aside for composite contracts, the Tribunal concluded that the demand in the present case could only be made under WCS.

In line with the precedents and considering similar judgments in other cases like Sri Rosh Properties Pvt. Ltd. Vs CCE & ST, the Tribunal held that the demand for service tax under CICS for composite contracts before 1.7.2012 was not sustainable. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief.