2016 (12) TMI 1274 - AT - Service Tax

Classification of services - work orders executed by the appellants - whether the service would fall under the head erection, commissioning or installation service so as to attract service tax or would constitute manufacture so as to attract excise duty? - Held that - the definition of the service of erection, commissioning or installation has undergone repeated changes during the disputed period. Before finalizing the classification of the activity carried out and crystallizing the demand of service tax, we are of the view that the activities covered in each work/job order needs to be examined with reference to the entry as it stood at the relevant time. The activity of erection was not part of the statute for the period 01/7/2003 to 09/9/2004. The scope of the entry during the period 10/9/2004 to 15/6/2005 was also limited Reliance placed in the case of M/s Neo Structo Construction Ltd. Versus CCE & C Surat I and vice versa 2010 (3) TMI 252 - CESTAT, AHMEDABAD , where the Tribunal has held that wherever fabrication of structures amounts to manufacture under Section 2 (f) of the Central Excise Act, in such cases no service tax can be demanded under the category of erection of plant, machinery or equipment as no civil work was undertaken - We find that this decision of the Tribunal is relevant to the present case. Demand of service tax is to be excluded wherever such fabrication activity amounts to manufacture, leading to a structure classifiable under Section 73.08 of the Central Excise Tariff. Appeal allowed by way of remand.

Summary

Issues:
Classification of services under erection, commissioning, or installation service for service tax liability. Applicability of taxable entry Section 65 (105) (zzd) for the services provided. Bar on demand prior to specific dates due to changes in taxable entry. Consideration of repair and restoration services for tax liability. Limitation on demand due to bonafide belief and regular payment of service tax.

Analysis:
The appeal challenged an order-in-appeal passed by the Commissioner (Appeals), Jaipur, regarding the demand of service tax amounting to ? 9,50,002 for services provided to M/s DCM Shriram Consolidated Ltd. The appellant contested the classification of services under erection, commissioning, or installation service. The appellant raised various grounds of appeal, including the argument that the services provided did not fall under the taxable entry Section 65 (105) (zzd) due to the nature of work orders executed. They also argued that changes in the taxable entry during the dispute period affected the demand for service tax prior to specific dates. Additionally, the appellant contended that some services, such as repair and restoration, should not be taxed under erection, commissioning, or installation service. They also claimed a limitation on demand before October 2007 due to a bonafide belief and regular payment of service tax for specific contracts.

During the hearing, both sides presented their arguments. The Adjudicating Authority classified the appellant's activities as erection, commissioning, or installation service, emphasizing that repair activities were subordinate and fell under the main activity. The appellant's conduct of not responding to summons raised concerns about evading service tax. The Tribunal noted that the definition of erection, commissioning, or installation service underwent changes during the dispute period. The Tribunal observed discrepancies in the examination of work orders concerning the scope of the taxable entry. The Tribunal referenced a relevant case law regarding fabrication activities amounting to manufacture, which could impact the demand for service tax.

Consequently, the Tribunal set aside the lower authorities' order and remanded the matter for a fresh decision by the original Adjudicating Authority. The Tribunal emphasized the need for a thorough examination of each work/job order in alignment with the relevant scope of the taxable entry during the disputed period. The appellant was directed to be given a fair opportunity to present their case effectively. The appeal was allowed by way of remand, ensuring due consideration of all relevant submissions.

In conclusion, the Tribunal's decision highlighted the importance of correctly applying the taxable entry provisions and conducting a comprehensive assessment of the services provided to determine the service tax liability. The remand order aimed to ensure a fair and detailed evaluation of the appellant's activities in light of the evolving legal framework governing service tax classification.