2018 (2) TMI 1113 - AT - Service Tax

Classification of services - appellant constructed a shopping mall namely Chennai Citi Centre and also individual dwellings in Tsunami affected areas at Kanyakumari on behalf of World Vision India which is a non-profitable organisation - also, another project undertaken by the appellant was construction of residential quarters for Central Government and Defence Department and Theni Medical College - appellant contends the activities to fall under works contract services, whereas, Revenue alleges these activities to fall under Commercial or Industrial Construction Services. Held that - Hon. Apex Court in the case of Larsen & Toubro Ltd 2015 (8) TMI 749 - SUPREME COURT has held that works contract services are not subject to levy of service tax prior to 1.6.2007 - Admittedly appellants are registered under the category of works contract services from 1.6.2007 and are discharging the service tax under this category. The demand is raised for the period from 10.9.2004 to 30.9.2007 under the category of Construction of residential complex and Commercial or Industrial Construction Services . On perusal of the records, it shows that the appellant had undertaken the works on a turnkey project basis - it is seen that the construction services were completed prior to 1.6.2007. In such case, the decision laid in Larsen & Toubro judgement (supra) would squarely apply to the demand raised prior to 1.6.2007 and requires to be set aside, which we hereby do. Whether the decision of L T is applicable to the amount received by appellant after 1.6.2007 requires verification. For this limited purpose, the matter requires to be remanded to the adjudicating authority who shall verify, whether, the amount received after 1.6.2007 is in respect of construction services completed prior to 1.6.2007 or not - appeal allowed by way of remand.

Summary

Issues:
1. Whether the appellant's construction activities are subject to service tax under Commercial or Industrial Construction Services (CICS) and Construction of Residential Complex Services.
2. Whether the appellant's contracts are composite contracts exempt from service tax prior to 1.6.2007.
3. Whether the demand of service tax for the period before and after 1.6.2007 is sustainable based on the nature of construction activities undertaken.

Analysis:
1. The appellants, engaged in works contract services, constructed various projects including a shopping mall, residential quarters, and houses for Tsunami affected areas. The department alleged non-payment of service tax under CICS and demanded service tax with interest. The appellant argued that pre-1.6.2007 period is exempt from service tax as per Larsen & Toubro Ltd case. They contended that their activities fall under works contract services and not CICS or Construction of Residential Complex Services, citing Tribunal precedents. The department argued that the activities constitute commercial or industrial construction and construction of residential complexes, emphasizing the non-composite nature of the contracts.

2. The appellant relied on Larsen & Toubro Ltd case to support their claim of exemption from service tax pre-1.6.2007 due to the composite nature of their contracts. They highlighted that post-1.6.2007, they are registered under works contract services. The department countered, stating the contracts are not composite and fall under construction of complex services and CICS. They pointed out specific projects like residential quarters for medical college staff and Tsunami affected areas as examples of taxable activities.

3. The Tribunal observed that the appellant's projects were undertaken on a turnkey basis, constituting works contract services. Statements from company officials confirmed completion of projects before 1.6.2007. The Tribunal referenced Larsen & Toubro judgment to set aside the demand for the period pre-1.6.2007. For the post-1.6.2007 period, it directed a remand to verify if amounts received after 1.6.2007 were for services completed before that date, citing relevant Tribunal decisions. The impugned order was modified to exclude pre-1.6.2007 demand and remanded for further verification on post-1.6.2007 demand.

This detailed analysis covers the issues raised in the judgment comprehensively, addressing the arguments presented by both the appellant and the department, along with the Tribunal's findings and directions.