2024 (12) TMI 672 - AT - Service Tax

Classification of services - services rendered by the appellant to AAI, providing services in relation to construction, renovation, repair, maintenance, completion and finishing etc. of the buildings or the civil structures - Works Contract Services or Management, Maintenance or Repair Service? - time barred SCN. Whether the services rendered by the appellant to AAI amounts to rendering Works Contract Services or amounts to Management, Maintenance or Repair Service ? - HELD THAT - The services rendered by the appellants were not services simpliciter of Maintenance, Management and Repair but were the composite services involving service element as well as the element of sale of goods. Service Tax can be charged only on the service element. The value of goods if defined clearly has to be deducted from the total value - Since in present case, it is indivisible composite contract, the assessee is entitled to avail benefit of abatement of 67% under the Notification No. 1/2006-ST dated 01.03.2006. The gross amount charged for rendering composite service/WCS has been wrongly taken for calculating service tax liability and that the impugned services are wrongly alleged as that of Maintenance, Management and Repair Service. 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 had held that when the activities undertaken under various contracts involved providing of services along with providing the material for the same, the services are not simpliciter services but are the composite services called as Works Contract Service . The Hon ble Apex Court had also held that the Works Contract Services got identified in statute with effect from 1.6.2007 hence any contract for rendering the composite services cannot be levied to tax prior to 1.6.2007. The activity of the appellant rendered to AAI should be classified as Works Contract Service with effect from 1.6.2007. For the period i.e. from March 2006 to May 2007, the activity still cannot be called as Maintenance Management or Repair service. Though it could be Commercial or Industrial Construction Service as defined under Section 65(105) (zzq) of Finance Act, 1994, that too was not the service simpliciter, in the present case. Service Tax on service element - HELD THAT - Any area assessable for landing and taking off area for aircrafts for runways, for maintenance of aircrafts, for facilities of passengers and for aerodrum all are defined as airport. Resultantly R.G. Bhawan as well as Safdarjung is held to be covered under Airport . The Works Contract Services being provided to airports since are exempted. The demand of service tax on the service element also is held to be wrongly confirmed. Service tax on Services provided to CPWD - HELD THAT - It is observed that CPWD works under Ministry of Urban Development, Government of India for developing civil structure of the country. It is denied to have any commercial purpose by the appellant i.e. CPWD doesn t work for commerce. The Hon ble Apex Court in the case of Gannon Dunkerley Co. Madras Ltd. Vs. State of Madras 1954 (4) TMI 30 - MADRAS HIGH COURT has observed about trade and commerce that 'If a person buys goods with a view to sell them for profit, it is an ordinary case of trade. If the transactions are on a large scale it is called commerce. Nobody can define the volume of business, which would convert a trade into commerce. But everybody understands the distinction between the two with sufficient vagueness.' Hence, profit motive can be considered to be an important aspect for determining a transaction as a transaction for commerce or industry. Even under the common parlance the expression commerce and industry is associated with trade and business, which is generally carried out with the intention of making profits - The civil structures raised and maintained by CPWD since are for the government premises CPWD is held to be a non-commercial organization. Service tax liability for any services to such an organization does not arises. Therefore, demand confirmed is definitely liable to be set aside. Whether the show cause notice is barred by time? - HELD THAT - The appellant is not liable to pay service tax as confirmed against him, for the services being provided to airport and non commercial governmental authority hence there is no willful, misstatement when Nil return has been filed by the appellant. No other evidence has been produced by the department to prove any other positive act of the appellant resulting into alleged suppression nor any evidence is produced to prove the mala fide act of the appellant committed or omitted with an intent to evade payment of service tax. With these observations, the extended period of limitation has wrongly been invoked by the department. The demand for the period 2006-07 to 2011-12 has wrongly been raised vide the show cause notices - the show cause notice is held barred by limitation. Both the appeals have wrongly confirmed the demand. The order under challenge dated 18.06.2013 is accordingly, hereby set aside - Appeal allowed.

Summary

Issues Involved:

1. Classification of services: Whether the services rendered by the appellant to AAI amount to Works Contract Services (WCS) or Management, Maintenance, or Repair Services (MMR).
2. Validity of the show cause notice: Whether the show cause notice is barred by time due to the alleged suppression of facts.

Issue-wise Detailed Analysis:

Issue 1: Classification of Services

The primary issue revolves around the classification of services provided by the appellant. The appellant contended that their services, which involved construction, renovation, maintenance, and repair, were composite contracts that should be classified as Works Contract Services (WCS). The appellant argued that these services involved the transfer of property in goods, thus qualifying as WCS, which are not subject to service tax on the goods component. The appellant also argued that services provided to governmental authorities like CPWD are excluded from taxability under WCS.

The tribunal examined the definitions under Section 65 of the Finance Act, 1994, distinguishing between WCS and MMR services. It was noted that WCS involves composite contracts with a transfer of goods, whereas MMR pertains to service contracts simpliciter. The tribunal concluded that the appellant's services were indeed composite in nature, involving both service and goods components. As such, the appellant was entitled to an abatement of 67% under Notification No. 1/2006-ST for the goods component.

Furthermore, the tribunal observed that services provided to airports, such as those rendered to AAI, are exempt from service tax under the definition of "airport" in the Finance Act. Similarly, services provided to CPWD, a non-commercial government body, were also deemed non-taxable as they were not for commercial purposes.

Issue 2: Validity of the Show Cause Notice

The second issue addressed the validity of the show cause notice, particularly whether it was barred by time due to alleged suppression of facts by the appellant. The department had invoked the extended period of limitation, arguing that the appellant filed Nil ST-3 returns despite having a service tax liability, thereby suppressing facts.

The tribunal, however, found that the appellant had correctly classified their services as WCS and filed returns accordingly. There was no evidence of willful misstatement or suppression of facts. The tribunal cited the Supreme Court's decision in Anand Nishikawa Co. Ltd. Vs. CCE, which emphasized that mere failure to declare does not constitute willful suppression without a positive act of intent to evade tax.

Consequently, the tribunal held that the extended period of limitation was wrongly invoked. The show cause notice for Appeal No. 59894 of 2013 was deemed time-barred, and the demand was set aside. For Appeal No. 60130 of 2013, although within the normal limitation period, the demand was also set aside due to the incorrect classification of services.

Conclusion:

The tribunal concluded that the impugned demand was wrongly confirmed in both appeals. The services provided by the appellant were classified as WCS, entitling them to abatement for the goods component, and services to airports and non-commercial government bodies were exempt from service tax. The show cause notice was also found to be time-barred for the earlier period, and the demands were not sustainable. Consequently, the order dated 18.06.2013 was set aside, and both appeals were allowed.