2017 (6) TMI 1107 - AT - Service Tax

Composite works contract - whether the service tax for the period 2004-05 to 2008-09 have been rightly demanded invoking the extended period under the category of construction service/commercial and industrial construction service under the admitted facts that the appellant have executed a composite work with materials in the nature of works contract? - Held that - the contractee namely BPCL have deducted Sales Tax/VAT, on the material component, at source and issued tax deduction certificate under the State Vat Act. In view of these facts it is crystal clear that the appellant have done works contract which was not taxable prior to 1 June, 2007. Further, from the SCN it is found that there was no proposal to confirm the demand under the category of work contract for the period 1 June 2007 and thereafter - the work done by the appellant is not classifiable under construction service or commercial and industrial construction service . Accordingly, the SCN is not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the service tax for the period 2004-05 to 2008-09 was rightly demanded under construction service/commercial and industrial construction service.
2. Whether the demand was confirmed along with penalties.
3. Whether the appeal before the Commissioner (Appeals) was dismissed on limitation.
4. Whether the appellant's appeal before the Tribunal was within the granted time.
5. Whether the appellant's work falls under the category of construction service or commercial and industrial construction service.

Analysis:
1. The issue in this appeal revolves around the demand for service tax for the period 2004-05 to 2008-09 under the categories of construction service and commercial and industrial construction service due to the appellant executing a composite work with materials under a works contract. The show cause notice alleged that the appellant provided services to a specific corporation for constructing buildings and structures primarily for commerce or industries. The appellant, in response, admitted to providing services covered by service tax but cited lack of knowledge for not charging it for certain years. The demand was based on gross payments received without deducting the material component, amounting to a specific sum along with interest and penalties under relevant sections.

2. The proposed demand, along with penalties, was confirmed after contesting the matter. The appellant, feeling aggrieved, appealed to the Commissioner (Appeals), but the appeal was dismissed on the grounds of limitation without delving into the case's merits.

3. Regarding the limitation issue, the appellant had previously filed a writ application before the Allahabad High Court, which granted them the liberty to appeal before the Tribunal within a specified period. The appellant timely filed the present appeal before the Tribunal in compliance with the High Court's order.

4. On the merits of the case, the appellant presented additional documents during the hearing, including registration certificates and work orders showing the execution of construction works with materials. It was noted that the contractee had deducted Sales Tax/VAT on the material component and issued relevant certificates under the State VAT Act. The Tribunal found that the appellant's work constituted a works contract, which was not taxable before a certain date. Referring to a Supreme Court ruling, the Tribunal concluded that the appellant's work did not fall under the categories of construction service or commercial and industrial construction service. As a result, the show cause notice was deemed unsustainable, and the appeal was allowed, setting aside the impugned orders.

5. In conclusion, the Tribunal ruled in favor of the appellant, determining that their work did not fall under the specified service tax categories, leading to the allowance of the appeal and granting the appellant consequential benefits as per the law.