2018 (7) TMI 180 - AT - Service Tax

Classification of services - construction services - the assessee s contention is that their activities cannot be classified under the category of Commercial or Industrial Construction Service under Section 65(25)(b) of the Finance Act, 1994, since all the orders were titled as Work Orders and the scope of the work also included supply of goods and rendering of services - Held that - All the contracts are not for construction services and the same needs to be revisited in view of the facts of the case - On going through the work orders, it is observed that some contracts are for hiring of crane, removal of sludge, excavation of river channel, labour supply, replacement of equipment, cleaning activities, replacement of equipments/valves and some fabrication works. All the independent contracts cannot come under the purview of Construction Service. It would be appropriate to remand the matter to the Adjudicating Authority to consider the submissions of the assessee and the grounds of appeal filed by the Revenue - appeal allowed by way of remand.

Issues:
1. Classification of services under the category of Commercial or Industrial Construction Service for the period from 10.09.2004 to 31.07.2006.
2. Recalculation of service tax liability by the Adjudicating Authority.
3. Appeal against the Adjudication Order by the assessee.
4. Appeal against the recalculation of service tax by the Revenue.

Analysis:
1. The judgment pertains to the classification of services provided by the assessee under the category of Commercial or Industrial Construction Service for the period from 10.09.2004 to 31.07.2006. The assessee argued that the works undertaken were not solely construction-related and included various other activities beyond the scope of construction service. The Adjudicating Authority had calculated the tax liability based on the gross value received by the assessee, inclusive of all taxes. The Tribunal observed that not all contracts were for construction services, as some involved activities like hiring of crane, removal of sludge, excavation of river channel, labour supply, and cleaning activities, which did not fall under the purview of Construction Service as defined under Section 65(25)(b) of the Finance Act, 1994.

2. The Adjudicating Authority had confirmed the demand of service tax amounting to a specific sum along with interest and penalties under various sections of the Finance Act, 1994. The assessee contended that no appeal for service tax was raised until 01.08.2006 when they started collecting and depositing the service tax. The Tribunal noted that the Adjudicating Authority did not consider the categorization of services under the respective categories introduced at different dates. Consequently, the Tribunal decided to remand the matter to the Adjudicating Authority to reconsider the submissions of the assessee and the grounds of appeal filed by the Revenue, emphasizing that all independent contracts could not be classified as Construction Service.

3. The assessee had appealed against the Adjudication Order, while the Revenue had appealed against the recalculation of service tax. The Tribunal, after hearing both sides and examining the appeal records, concluded that a remand to the Adjudicating Authority was necessary for a thorough review of the classification of services and the tax liability calculation. The Tribunal directed the Adjudicating Authority to pass an order within three months from the date of receipt of the order, ensuring a reasonable opportunity of hearing for the assessee.

4. In summary, the appeals were allowed by way of remand to the Adjudicating Authority, highlighting the need for a detailed reconsideration of the classification of services and the appropriate tax liability calculation for the period in question. The Tribunal emphasized the importance of a thorough review in accordance with the law and granting a fair hearing to the assessee before reaching a final decision.

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