2018 (2) TMI 80 - AT - Service Tax

Commercial or Industrial Construction Service - completion and finishing services - period June 2005 to March 2008 - Held that - Hon ble Supreme Court in the case of Larsen & Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT held that the appellants will not be liable to pay service tax prior to 1.6.2007 - For the period from 31.6.2007 to 31.3.2008, considering the services as works contract service, they would be eligible for composition scheme. The tax liability, after application of composition scheme, has already been discharged by the appellant. Hence there is no further liability that is required to be paid by the appellant. For this reason, there shall be no further tax liability beyond the amount already paid by the appellant - there is no cause for imposition for penalty for which reason the penalty imposed under section 78 is set aside. Appeal allowed in part.

Summary

Issues:
Taxability of completion and finishing services under Commercial or Industrial Construction Service for the period June 2005 to March 2008. Applicability of service tax prior to 1.6.2007. Eligibility for composition scheme for works contract services from 1.6.2007 to 31.3.2008. Discharge of tax liability under composition scheme. Imposition of penalty under section 78 of the Finance Act, 1994.

Analysis:

1. Taxability of Completion and Finishing Services:
The appellants provided completion and finishing services such as acoustic applications, false ceiling, and acoustic panel partition. The Department categorized these services as taxable under Commercial or Industrial Construction Service for the period June 2005 to March 2008. The adjudicating authority confirmed a demand of ?44,34,115 along with interest and imposed a penalty under section 78 of the Finance Act, 1994. The Commissioner (Appeals) upheld this decision in the impugned order dated 22.12.2009, leading to the appeal.

2. Applicability of Service Tax Prior to 1.6.2007:
The appellant argued that based on a Supreme Court judgment in the case of Commissioner of Central Excise, Kerala Vs. Larsen & Toubro Ltd., they were not liable to pay service tax before 1.6.2007. For the period from 1.6.2007 to 31.3.2008, they claimed to have discharged the tax liability under the Commercial or Industrial Construction Service with a 67% abatement. They contended that as the services provided were works contract, they should benefit from the composition scheme. The appellant had already paid ?1,91,426 for the period June 2007 to March 2008, exceeding the amount required under the composition scheme, but they did not seek a refund of the excess amount paid.

3. Eligibility for Composition Scheme and Discharge of Tax Liability:
Considering the services as works contract service, the appellants were deemed eligible for the composition scheme. The appellants had already paid more than double the amount required under the composition scheme for the period from 1.6.2007 to 31.3.2008. They expressed no intention to claim a refund of the excess amount paid. Consequently, the tax liability, after applying the composition scheme, had been fulfilled by the appellant, and no further liability was deemed necessary.

4. Imposition of Penalty:
The Tribunal acknowledged that the entire issue surrounding the tax liability was complex and required clarification from the Apex Court. Given the circumstances, the Tribunal found no justification for imposing a penalty under section 78 of the Finance Act, 1994, and thus set aside the penalty.

5. Conclusion:
In conclusion, the Tribunal ruled that the appellants were not liable to pay service tax before 1.6.2007 and had fulfilled their tax liability under the composition scheme for the period from 1.6.2007 to 31.3.2008. As a result, there was no additional tax liability beyond what had already been paid. The penalty under section 78 was also revoked due to the complexity of the issue. The appeal was partly allowed based on the above findings.