2024 (8) TMI 600 - AT - Service Tax

Short payment/non-payment of service tax - Commercial or Industrial Construction Service - Construction of Complex Service - Completion and Finishing Job undertaken by the appellant - period 2005-06 to 2009-10 - Wrongful availment of benefit of N/N.01/2006-ST dated 01.03.2006 - HELD THAT - In this case, it is not in dispute that the appellant is providing the services along with materials. Therefore, the appropriate classification of the above services is under Works Contract Service and no demand of service tax is raised against the appellant under Works Contract Service in view of the decision of the Hon ble Apex Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT , wherein the Hon ble Apex Court has observed ' the finding that Section 67 of the Finance Act, which speaks of gross amount charged , only speaks of the gross amount charged for service provided and not the gross amount of the works contract as a whole from which various deductions have to be made to arrive at the service element in the said contract.' For the period prior to 01.06.2007, no service tax is payable by the appellant as the Works Contract Service came into effect w.e.f. 01.06.2007 and for rest of the demand, no demand has been raised against the appellant under the category of Works Contract Service . No service tax is payable by the appellant. Therefore, whatever service tax paid by the appellant during the impugned period, the same is appropriated and no further demand is sustainable against the appellant on account of short payment or non-payment of service tax by the appellant. The differential demands of service tax confirmed against the appellant are set aside. Consequently, no penalty is imposable on the appellant. The impugned order is set aside - appeal allowed.

Summary

Issues:
Appeal against demand of service tax for short payment/non-payment under "Commercial or Industrial Construction Service" and "Construction of Complex Service" during 2005-06 to 2009-10.

Analysis:
The appellant appealed against the demand of service tax confirmed for short payment/non-payment under the categories of "Commercial or Industrial Construction Service" and "Construction of Complex Service" for the period 2005-06 to 2009-10. The appellant was alleged to have wrongly availed the benefit of certain notifications during the relevant period. A show-cause notice was issued invoking the extended period of limitation, and the demand of service tax was confirmed. The appellant contended that they provided services along with materials, making the appropriate classification of services as "Works Contract Service," which is taxable from 01.06.2007 as per a decision by the Apex Court. The Revenue supported the impugned order, but it was found that if the appellant provided services along with materials, they were entitled to the benefit of a specific notification dated 01.03.2006. The classification of services as "Works Contract Service" exempted the appellant from service tax liability for the period prior to 01.06.2007. Consequently, the differential demands of service tax were set aside, and no penalty was imposed on the appellant.

In the case, it was established that the appellant provided services along with materials, which led to the classification of services as "Works Contract Service." This classification was crucial as it exempted the appellant from service tax liability for the period before 01.06.2007. The Tribunal referred to a decision by the Apex Court, emphasizing that the taxation of service contracts did not extend to composite works contracts. The judgment highlighted the importance of bifurcating service elements in composite works contracts for accurate taxation. It was noted that the Finance Act did not provide for taxation on indivisible works contracts, and errors in previous judgments were pointed out. As a result, the Tribunal held that no service tax was payable by the appellant for the period before 01.06.2007 and that no demand had been raised against the appellant under the category of "Works Contract Service" for the remaining period. The appellant's appeal was allowed, and the impugned order was set aside, with no further demand sustainable against the appellant for short payment or non-payment of service tax.

Therefore, the Tribunal's decision focused on the classification of services provided by the appellant as "Works Contract Service," which exempted them from service tax liability for a specific period. The judgment also highlighted the legal interpretation regarding the taxation of composite works contracts and the importance of accurately determining service elements for taxation purposes. Ultimately, the appellant's appeal was successful, and the differential demands of service tax were overturned, with no penalty imposed.