2016 (9) TMI 631 - AT - Service Tax

Invokation of extended period of limitation - Demand alongwith interest and penalty - Commercial or industrial construction service for the period upto 31-05-2007 and Works Contract service for the period 01-06-2007 to 31-03-2011 - Held that - the appellant has contended that service provided by them has been correctly classified as WCS for the period from 01-06-2007 and that same service cannot be classified under CICS for the period prior to 01-06-2007. This contention is correct and any dispute in this regard has been settled by the Hon ble Apex Court in the case of Commissioner CE & Cus, Kerala Vs Larsen & Toubro Ltd 2015 (8) TMI 749 - SUPREME COURT . This being so, there can be no demand on the appellant on WCS provided by him prior to 01-06-2007 and even by treating such services as CICS. The show cause notice itself acknowledges that ST-3 returns have been filed by the appellant. It also takes cognizance of the fact that the appellants had approached the A.P. High Court with regard to dispute to nature of service provided by them. This being so, it is patently incorrect for the department to allege in the said show cause notice, wilful suppression of facts. In consequence, invocation of extended period in the show cause notice is not justifiable and the demand of tax will have to be limited to the normal period of one year computed from the date of service of notice which the appellant has claimed to be 01-11-2011. Also the appellant has contended that rate of service tax on WCS has been computed wrongly at 4% instead of 2% from 01-06-2007 to 20-08-2008; that demand has ignored and not taken into account that their abated value of turn over during impugned period was below threshold limit of taxability. Therefore, the demand in show cause notice beyond the normal period is unsustainable being barred by limitation. The matter requires to be remanded to original authority for re-quantification. - Appeal partly allowed by way of remand

Summary

Issues:
1. Alleged failure to obtain service tax registration and pay service tax on construction works.
2. Dismissal of appeal by Commissioner (Appeals) as barred by limitation.
3. Classification of services under Works Contract Services (WCS) and Commercial & Industrial Services (CICS).
4. Incorrect computation of service tax rate and abated turnover value.
5. Invocation of extended period for demand of service tax.

Issue 1: Alleged failure to obtain service tax registration and pay service tax on construction works:
The appellants were accused of not obtaining service tax registration and not paying the service tax on construction works for petrol pumps awarded by various corporations. A show cause notice was issued proposing a demand of service tax along with penalties. The lower authority confirmed the proposals, which were upheld by the Commissioner (Appeals) initially but later set aside by the Tribunal for fresh decision.

Issue 2: Dismissal of appeal by Commissioner (Appeals) as barred by limitation:
The Commissioner (Appeals) initially dismissed the appeal as barred by limitation, but on denovo consideration, held the appeal as filed within the time limit. However, the appeal was ultimately dismissed, leading the appellant to file a further appeal.

Issue 3: Classification of services under Works Contract Services (WCS) and Commercial & Industrial Services (CICS):
The appellant argued that no liability arose prior to 01-06-2007 for works contract services, citing a Supreme Court judgment. They also highlighted correspondence with the department challenging the new levy of service tax. The Tribunal agreed that no demand could be made for WCS provided before 01-06-2007 and found the classification of services to be incorrect.

Issue 4: Incorrect computation of service tax rate and abated turnover value:
The appellant contended that the rate of service tax on WCS was wrongly computed, and the demand failed to consider that their turnover during the impugned period was below the threshold limit of taxability. The Tribunal found these contentions to be valid and required re-quantification of the demand.

Issue 5: Invocation of extended period for demand of service tax:
The show cause notice invoked the extended period for demanding service tax, alleging suppression of facts by the appellant. However, the Tribunal found that the demand beyond the normal period was unsustainable and remanded the matter to the original authority for re-quantification based on the correct classification of services and other contentions raised by the appellant.

This judgment addressed issues related to service tax registration, classification of services, computation of tax rates, and the invocation of the extended period for demand. It highlighted the importance of correct classification and computation in determining tax liabilities and emphasized the need for proper consideration of threshold limits and legal provisions. The Tribunal's decision to partially allow the appeal and remand the matter for re-quantification reflects a meticulous analysis of the facts and legal arguments presented by both parties.