2013 (11) TMI 403 - AT - Service Tax

Interior Decorator Service - Held that - Following Spandrel Versus Commissioner of Central Excise, Hyderabad 2010 (5) TMI 299 - CESTAT, BANGALORE - Services rendered by assessee were brought for first time in definition of Commercial or Industrial Construction Service w.e.f. 16.06.2005 Thus, the activities of assessee during relevant period would not be covered under definition of Interior decorator s service - The activities which had been undertaken in the clarification have been specifically included - This would indicate that prior to 16.6.2005, these were not included in the category of interior decorator service - if the category of services is brought into service tax net from a specific date, such services would not be covered under any other category of services. Any structure or edifice enclosing a space within its walls would come within the scope of building and therefore even a particular floor or unit of a building which encloses a space within its walls and covered with roof would come within the scope of term building - if any activity is undertaken in relation to a particular floor or unit of the building, it would certainly amount to activity being undertaken in relation to a building as envisaged in clauses (c) and (d) of Section 65 (25b) of the Finance Act, 1994 - In the definition of taxable service, under section 65 (105) (zzq), the expression used is in relation to has been construed to be of widest amplitude Relying upon Doypack Systems Ltd. Vs. UOI 1988 (2) TMI 61 - SUPREME COURT OF INDIA . Difference of opinion - On the issue of classification and taxability, both the members are in agreement - decided against the assessee. - But on the issue of raising demand invoking extended period of limitation and levy of penalty, there is no consent between the two members - matter referred to larger bench on the issue of period of limitation and penalty.

Issues Involved:
1. Classification of services rendered by the appellant.
2. Applicability of service tax on activities undertaken by the appellant.
3. Invocation of the extended period of limitation for demand.
4. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Classification of Services Rendered by the Appellant:
The primary issue was whether the activities undertaken by the appellant fell under "Commercial or Industrial Construction Service" as defined in Section 65 (25b) of the Finance Act, 1994. The appellant argued that their activities, which included renovation and interior decoration, did not qualify under this category. However, the tribunal held that the activities undertaken by the appellant, including masonry work, plastering, tiling, false ceiling, painting, and electrical fittings, fell under clauses (c) and (d) of Section 65 (25b). The tribunal concluded that these activities were indeed part of "Commercial or Industrial Construction Service" irrespective of whether they were performed on a new or old building.

2. Applicability of Service Tax:
The tribunal examined whether the services rendered were liable for service tax. The appellant contended that their work was related to parts of a building and not the entire building, arguing that service tax should not apply. However, the tribunal rejected this argument, stating that activities performed on any part of the building are considered activities in relation to the building itself. The tribunal cited the case of Spandrel Vs. CCE, Hyderabad/Kochi, which supported the view that such activities fall under "Commercial or Industrial Construction Services." Therefore, the tribunal upheld the service tax demand of Rs. 1,61,48,983/- along with interest.

3. Invocation of the Extended Period of Limitation:
The appellant argued that the demand was time-barred as the department was aware of their activities from earlier show-cause notices issued for excise duty. The tribunal, however, found that these earlier notices pertained to periods before the introduction of service tax on "Commercial or Industrial Construction Service." Since the appellant had not registered for service tax nor complied with statutory provisions, the tribunal held that the extended period of limitation was rightly invoked under Section 73 (1) of the Finance Act, 1994.

4. Imposition of Penalties:
The tribunal upheld the imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994, and Rule 7C of the Service Tax Rules, 1994. It was noted that penalties under Section 76 could be imposed for default in payment of service tax without requiring proof of mens rea. The tribunal also held that penalties under both Sections 76 and 78 could be imposed for the period prior to 10-5-2008. The argument of revenue neutrality raised by the appellant was dismissed, as it applies only when the payment of tax and availment of credit is by the same entity.

Separate Judgments:
Opinion of Judicial Member (Shri Anil Choudhary):
The Judicial Member agreed with the classification of services but differed on the aspect of limitation and penalties. He observed that the Revenue had prior knowledge of the appellant's activities and had issued show-cause notices for excise duty. He argued that the extended period of limitation was not applicable due to the lack of intent to evade tax. Consequently, he held that penalties under Sections 76, 77, and 78 should be set aside.

Conclusion:
The tribunal upheld the classification of services under "Commercial or Industrial Construction Service" and the demand for service tax along with interest. However, there was a difference of opinion regarding the invocation of the extended period of limitation and the imposition of penalties, which was referred to the President of CESTAT for resolution.

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