2018 (1) TMI 562 - AT - Service Tax

Commercial or industrial construction service - Works contract service - taxability - Held that - the contracts for construction executed by the appellant/assessee are of composite nature. These are liable to be taxed only w.e.f. 1.6.2007 under works contract service - No tax liability on such contracts will arise for the period prior to 1.6.2007 - The rate to be applied for the relevant period should be examined along with the taxable consideration for re-quantification. Cum duty valuation in terms of Section 67(2) benefit can be extended subject to verification of invoice/contract to the satisfaction of the provisions of Section 67(2). - matter on remand. Repairs and maintenance of roads - Held that - the period in the present demand is fully covered by the retrospective exemption in terms of the Section 97 of Finance Act, 2012. Accordingly, no tax liability will survive. GTA service - Held that - no demand has been made to the assessee/appellant on such category. In absence of any demand for this tax liability, we find that the service tax liability confirmed cannot be sustained. Benefit of composition to the appellant post 1.6.2007 - Held that - Though no specific form for intimation has been prescribed under 2007 Scheme for composition payment of service tax, payment of tax in terms of said provision from the beginning can be construed to be such option - these aspects require verification by the Original Authority along with re-quantification and other issues mentioned above. Penalties - Held that - the tax liability on composite works contract are subject matter of litigation - no penalty is leviable for such tax liability against the appellant/assessee. Appeal allowed by way of remand.

Summary

Issues:
1. Tax liability for construction activities under different categories - commercial or industrial construction service, management maintenance or repair service, and GTA service.

Analysis:
The judgment by the Appellate Tribunal CESTAT NEW DELHI involved a dispute between the Revenue and the assessee regarding the confirmation of service tax liability for construction activities under various categories. The assessee, engaged in construction activities, contested the tax liability confirmed by the Commissioner of Central Excise, Jaipur-II. The period of dispute was from 10.04.2004 to 31.03.2008. The impugned order confirmed tax liability under "commercial and industrial construction service" for the period before 1.6.2007 and under "works contract service" post 1.6.2007. The appellant argued that composite contracts involving supply of goods and services should only be taxed from 1.6.2007 onwards, citing a Supreme Court decision. The appellant also challenged the computation of composition rates and the application of duty rates by the lower authorities.

Regarding tax liability under "maintenance or repair service," the appellant claimed exemption retrospectively under Section 97 of the Finance Act, 2012 for repair of roads, which should nullify the tax liability. Additionally, a small amount confirmed under GTA service was disputed by the appellant, arguing that no demand was made for such tax liability, and the confirmation under GTA service was legally unsustainable. The appellant also referred to a Tribunal decision regarding the exclusion of the value of free supply items in the taxable value.

The Appellate Tribunal heard arguments from both sides and concluded that contracts for construction were of a composite nature and should only be taxed from 1.6.2007 onwards under "works contract service." The Tribunal directed a re-examination of the tax rate, composition, and cum duty valuation for the relevant period. The retrospective exemption under the Finance Act, 2012 was acknowledged for repair and maintenance of roads, eliminating the tax liability. The confirmation of tax liability under GTA service was deemed unsustainable due to the absence of a specific demand. The Tribunal also addressed the issue of composition scheme post 1.6.2007, requiring verification by the Original Authority.

The Tribunal allowed the appeals of both the Revenue and the assessee, remanding the case to the Original Authority for a fresh decision on the points raised. The Tribunal emphasized providing the appellant with an opportunity to present their case and highlighted the need for verification of various aspects by the Original Authority. The judgment set aside the impugned order and disposed of the cross objection, emphasizing the non-leviability of penalties considering the litigious nature of the tax liability on composite works contracts.

In conclusion, the judgment provided a detailed analysis of the tax liabilities for construction activities under different categories, addressing legal interpretations, exemptions, composition schemes, and the necessity for verification and re-quantification by the Original Authority.