2017 (12) TMI 170 - AT - Service Tax

Classification of services - works contract service - erection commissioning or installation, commercial or industrial construction service and construction of complex service - valuation - Held that - there is an element of lack of clarity in various issues dealt with in the impugned orders. First of all, there is a dispute regarding quantification of taxable value itself. The Revenue proceeded to consider income figures in Profit and Loss Account - the same is not supported by legal provisions. The taxable value in terms of Section 67 of the Finance Act has to be arrived at based on clear documentary evidence. No doubt, such documentary evidences are to be submitted by the appellants as a provider of service. They are obliged by law to provide such data. Composite services or not? - Held that - the impugned orders suffer from various infirmities attributable to factual appreciation and quantification. The tax liability of composite works contract is to be determined in line with the decision of Hon ble Supreme Court in Larsen & Toubro Limited 2015 (8) TMI 749 - SUPREME COURT . The tax liability on such contract will arise only with effect from 01.06.2007. The quantification on taxable value should be based on the actual receipts of consideration by the appellant. There can be no levy of service tax on composite works contract for the period prior to 01.06.2007. The impugned orders cannot be sustained in the present form - matter is remanded back to the original authority for a combined decision of all the notices which were considered and decided in the impugned orders - appeal allowed by way of remand.

Summary

Issues:
Service tax liability on contracts executed for Ministry of Defence from 2006-07 to 2011-12, quantification of taxable value, application of composition scheme rates, dispute over rates for continuing works contract, lack of clarity in impugned orders, legal tenability of tax liability on composite works contracts, availability of supporting evidence for tax calculation.

Analysis:

1. Quantification of Taxable Value:
The original authority confirmed a substantial service tax liability for the appellant under various services for the period in question. The appellant contended that the quantification of taxable value was flawed as it was based on income figures and estimated values rather than clear documentary evidence as required by Section 67 of the Finance Act. The appellant argued that the impugned orders lacked clarity in this regard and that they had provided reconciliation between Profit & Loss Account and Service Tax returns, which was not considered.

2. Application of Composition Scheme Rates:
The appellant raised concerns over the application of composition scheme rates for works contracts. They argued that the rate applicable should be based on the date of execution of the contract and not the date of receipt of consideration. The appellant also contested the imposition of penalties under various sections of the Finance Act, 1994. They emphasized the need for proper identification and quantification of tax liability for each contract and year, highlighting discrepancies in the rates and classifications applied to the same contract.

3. Legal Tenability of Tax Liability on Composite Works Contracts:
The Tribunal noted that the services rendered by the appellant were claimed to be composite in nature, and the Hon’ble Supreme Court's decision in Larsen & Toubro Limited was cited to support the argument that no service tax liability arises on such contracts for the period before 01.06.2007. The Tribunal emphasized the need for examining the applicability of abatement or composition schemes for works contracts and rejected the appellant's argument that the rate of duty applicable at the commencement of the contract should apply for the entire duration.

4. Availability of Supporting Evidence:
The Tribunal highlighted that the appellant failed to provide full particulars and supporting evidence throughout the proceedings, causing difficulties for the adjudicating authority to examine their contentions. The appellant's lack of cooperation and failure to provide details of contracts, payment schedules, and actual receipts were noted. The Tribunal emphasized the appellant's legal obligation to provide clear documentary evidence to support their tax calculations.

5. Conclusion:
After considering the submissions and issues raised by both parties, the Tribunal found various infirmities in the impugned orders related to factual appreciation and quantification of tax liability. The orders were set aside, and the matter was remanded back to the original authority for a comprehensive decision on all notices. The appellant was directed to provide all necessary documents and evidence for a reasoned decision. The appeals were allowed by way of remand, emphasizing the need for a thorough analysis based on supporting documentary evidence.