2025 (3) TMI 1352 - AT - Service Tax

Demand of service tax prior to 01.06.2007 under Interior Decorator Service for the periods prior to June 2007 and from June 2007-September 2009 - invocation of extended period of limitation - demands of service tax under Completion and Finishing services. HELD THAT - The Appellant was a registered Service Tax assessee under Interior Decorator service w.e.f. 29.01.2008 and under Works Contract Service from 12.10.2009. The SCN were issued proposing demand of service tax under Interior Decorator service which were confirmed by the Original Adjudicating Authority and penalties imposed whereas the impugned order confirmed the demands under Completion and Finishing services for the period only from 16.06.2005. The Appellant maintained that even prior to 01.06.2007 he was rendering works contract services as the contract was a composite one involving supply of materials and labour and hence not chargeable to service tax under Interior Decorator service prior to 01.06.2007 in terms of the Hon ble Supreme Court s decision in Commissioner vs. Larsen Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT . A perusal of the appeal records indicate that the assessee is engaged in rendering of services related to carpentry work false ceiling flooring painting electrical work civil work layout of offices etc. which is squarely covered under Completion and Finishing services which falls within the ambit of Commercial or Industrial Construction service w.e.f. 16.06.2005 and being so such services are also covered under the definition of Works contract services w.e.f. 01.06.2007. The demands were made under Interior Decorator service and confirmed by the Adjudicating Authority whereas the impugned order confirmed the demands w.e.f. 16.06.2005 under Completion and Finishing services. The impugned order has thus travelled beyond the Show Cause Notice and the demand prior to and after 01.06.2007 for this reason alone cannot sustain. For the period after 01.06.2007 the demand confirmed by the adjudicating authority was under interior decorator service instead of under Works Contract service and hence the demand is also not legally sustainable. As the demand itself could not sustain the question of invocation of extended period for demand of duty and penalty does not arise. Conclusion - i) The services provided by the appellant in respect of the projects executed by them for the period prior to 1-6-2007 being in the nature of composite works contract cannot be brought within the fold of Interior Decorator service in the light of the Hon ble Supreme Court judgment in Larsen Toubro. ii) For the period after 01.06.2007 for activities involving indivisible composite works contract service tax is leviable under Works Contract Service as defined under section 65(105)(zzzza) but the demand has been inadvertently made under Interior Decorator service/ Completion and Finishing services and hence does not sustain as the demand itself suffers from infirmities. Appeal allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

i. Whether the demand of service tax prior to 01.06.2007 under Interior Decorator Service for the periods prior to June 2007 and from June 2007-September 2009 is sustainable and whether the extended period of demand is invokable, considering the facts and circumstances of these appeals?

ii. Whether the demands of service tax under Completion and Finishing services are sustainable w.e.f. 16.06.2005?

ISSUE-WISE DETAILED ANALYSIS

1. Demand of Service Tax under Interior Decorator Service and Invocation of Extended Period

Relevant legal framework and precedents: The definition of "Interior Decorator service" includes services related to planning, design, or beautification of spaces. The legal framework also includes the Finance Act, 1994, particularly Section 65(105), which defines taxable services. The Supreme Court's judgment in Commissioner vs. Larsen & Toubro Ltd. established that service tax on composite contracts involving both goods and services cannot be levied under service contracts simpliciter.

Court's interpretation and reasoning: The Tribunal noted that the appellant was registered under "Interior Decorator" service from 29.01.2008, and the demand was made under this service category. However, the appellant argued that their contracts were composite, involving both materials and labor, and thus should not be taxed under Interior Decorator service for the period prior to 01.06.2007.

Key evidence and findings: The appellant provided services such as carpentry, false ceiling, flooring, painting, and electrical work, which fall under Completion and Finishing services within the ambit of Commercial or Industrial Construction service from 16.06.2005.

Application of law to facts: The Tribunal applied the Supreme Court's ruling in Larsen & Toubro, which states that composite works contracts cannot be taxed under service contracts simpliciter. Therefore, the demand under Interior Decorator service for the period prior to 01.06.2007 was not sustainable.

Treatment of competing arguments: The appellant's argument was supported by precedents, while the Department argued that the appellant suppressed facts to evade tax. The Tribunal found merit in the appellant's position based on legal precedents.

Conclusions: The Tribunal concluded that the demand for service tax under Interior Decorator service prior to 01.06.2007 was not sustainable, and the invocation of the extended period for demand was not justified.

2. Demand of Service Tax under Completion and Finishing Services

Relevant legal framework and precedents: Completion and Finishing services were included in the definition of Commercial or Industrial Construction service from 16.06.2005. The introduction of Works Contract service from 01.06.2007 further clarified the taxation of composite contracts.

Court's interpretation and reasoning: The Tribunal noted that the appellant's services were covered under Completion and Finishing services and Works Contract services. The demand under Completion and Finishing services was confirmed by the lower authority for the period from 16.06.2005.

Key evidence and findings: The appellant's activities were found to be composite in nature, involving both goods and services, which should be taxed under Works Contract service post-01.06.2007.

Application of law to facts: The Tribunal applied the legal framework to determine that the demand under Completion and Finishing services was not sustainable, as the services were part of a composite contract.

Treatment of competing arguments: The appellant argued that the demand should be under Works Contract service, not Completion and Finishing services. The Tribunal agreed, citing legal precedents.

Conclusions: The Tribunal concluded that the demand under Completion and Finishing services was not sustainable post-01.06.2007, as the services were part of a composite contract taxable under Works Contract service.

SIGNIFICANT HOLDINGS

Verbatim quotes of crucial legal reasoning: "A close look at the Finance Act, 1994 would show that the five taxable services referred to in the charging Section 65(105) would refer only to service contracts simpliciter and not to composite works contracts."

Core principles established: Composite contracts involving both goods and services cannot be taxed under service contracts simpliciter. The introduction of Works Contract service clarifies the taxation of such contracts post-01.06.2007.

Final determinations on each issue: The Tribunal set aside the impugned orders, concluding that the demands under Interior Decorator service prior to 01.06.2007 and under Completion and Finishing services post-16.06.2005 were not sustainable. The appeals were allowed with consequential reliefs as per law.