2017 (10) TMI 404 - AT - Service Tax

Benefit of N/N. 1/2006 dt. 1.3.2006 - services where material was included in the provisions of service - Commercial and Industrial Construction Service - Management, Maintenance or Repairs Service - Construction of Complex Service - Held that - The argument that the services are in the nature of works contract services is a legal argument and can be raised by the appellant even if it was not raised earlier. In his submissions before Tribunal - the Ld. C.A. has brought to our attention pages 315 to 332, 357 & 358, 344, 353, 354 of appeal to show that the said contracts are in the nature of works contracts as the price is inclusive of material and works contract tax has been deducted. In respect of these services service tax from the period prior to introduction of the works contract service cannot be demanded - demand set aside. Valuation - non-inclusion of the material supplied by the service recipient for provision of the in the assessable value - Held that - In view of the decision of Larger Bench of Tribunal in the case of M/s. Bhayana Builders (P) Ltd. Vs. CST, Delhi 2013 (9) TMI 294 - CESTAT NEW DELHI (LB) , the said amount cannot be included in the assessable value for the purpose of payment of duty - The value of free supply material cannot be included in the value for the purpose of charging service tax - demand set aside. In respect of Multipurpose Hall of Municipal Council Umred and Multipurpose Hall and Library Building Construction for PWD, Nagpur, the appellant have contended before the Commissioner that the said construction is not of commercial nature - Held that - It is seen that in this regard the order of Commissioner is not a speaking order as it gives no finding in respect of Multipurpose Hall and Library building constructed for PWD, Nagpur - In view of the clear cut Certificate the same cannot be treated as commercial building attracted service tax in the category of commercial and industrial construction. The certificate issued from the office of Municipal Corporation, Umred dt. 30.4.2012 also certifies that it is used for public utility and no revenue generated from the same. In view of this certificate, it is apparent that no tax under the category of commercial and industrial construction can be demanded in respect of these structures - demand set aside. Management, Maintenance or Repairs for goods, equipments or properties service - demand of service tax - Held that - On perusal of contracts it is seen that the services provided by the appellant are in the nature of repair services. There is no exclusion from the levy of service tax under management, maintenance or repair service for such services given to non commercial structures thus these services would be rightly classifiable and taxable under management, maintenance or repair services. However it is seen that vide Notification No. 54/2010-ST dt. 21.12.2010 full exemption has been provided in respect of management, maintenance or repairs of roads, tunnels, bridges etc - no duty can be demanded in respect of repairs made to bridges - demand set aside. Construction of complex service - Construction of artificial testing track at Dy. RTO Office premises at Chandrapur - appellants had contended that the testing track is nothing but a road the Commissioner has held that the said track cannot be considered as road - Held that - it is apparent that the said services cannot be charged to service tax under the category of construction and complex service as the service recipient has engaged the appellants for construction of properties for the use of their employees and not for any other purpose - demand set aside. Extended period of limitation - penalty - Held that - the appellants are a large company and are expected to be fully aware of the laws commercial and industrial construction service, management, maintenance and repair services. They cannot plead ignorance for failure to file return and to pay service ta - extended period and penalty rightly invoked. Appeal allowed in part - For the quantification of duty and redetermination of penalty under Section 78 the matter is remanded to the original adjudicating authority.

Issues Involved:
1. Classification of services as works contract.
2. Non-inclusion of material supplied by service recipient in assessable value.
3. Nature of construction for Municipal Council and PWD.
4. Classification of repairs to bridges and Government Engineering College.
5. Classification of construction of artificial testing track.
6. Taxability of construction of residential complexes.
7. Invocation of extended period of limitation and imposition of penalties.

Issue-Wise Detailed Analysis:

1. Classification of Services as Works Contract:
The appellant argued that many contracts, such as the construction of a coal washery and administrative buildings, included materials and thus should be classified as works contracts. The tribunal agreed, referencing the Hon'ble Apex Court case of Larsen & Toubro Ltd., stating that services provided before the introduction of works contract service cannot be taxed.

2. Non-Inclusion of Material Supplied by Service Recipient in Assessable Value:
The tribunal referenced the Larger Bench decision in M/s. Bhayana Builders (P) Ltd. vs. CST, Delhi, which held that the value of free supply material cannot be included in the assessable value for service tax purposes. The tribunal set aside the findings that included these materials in the assessable value.

3. Nature of Construction for Municipal Council and PWD:
The tribunal found that the Commissioner did not provide a clear rationale for classifying the Multipurpose Hall and Library Building for PWD as commercial. Certificates from the Municipal Council and Sub Divisional Engineer indicated that these buildings were for non-commercial use. Thus, no service tax could be demanded under commercial and industrial construction service.

4. Classification of Repairs to Bridges and Government Engineering College:
The tribunal noted that repairs to bridges and the Government Engineering College could not be classified under commercial and industrial construction service. However, these services were taxable under management, maintenance, or repair services. The tribunal referenced Notification No. 54/2010-ST, which exempts repairs to roads, tunnels, and bridges, thus setting aside the demand for repairs to bridges.

5. Classification of Construction of Artificial Testing Track:
The tribunal disagreed with the Commissioner’s classification of the testing track as not being a road. It held that the testing track, despite its specialized features, is a road and thus exempt from service tax under commercial and industrial construction service.

6. Taxability of Construction of Residential Complexes:
The appellant argued that the construction of residential complexes for entities like Western Coalfields Limited and Nagpur Housing and Area Development Board was for personal use and thus not taxable. The tribunal agreed, citing the Tribunal's decision in Sima Engg. Constructions vs. Commissioner of C. Ex., Trichy, which held that such constructions for personal use are excluded from the definition of construction of complex services.

7. Invocation of Extended Period of Limitation and Imposition of Penalties:
The tribunal upheld the invocation of the extended period of limitation and the imposition of penalties under Sections 77 and 78, noting that the appellant, being a large company, should have been aware of the service tax laws and could not plead ignorance.

Conclusion:
The appeal was partly allowed, with the tribunal remanding the matter to the original adjudicating authority for the quantification of duty and redetermination of penalty under Section 78.

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