2018 (11) TMI 1226 - AT - Service Tax

Classification of service - business of carrying out Erection, Commissioning or Installation of Towers for cellular companies - whether classified as works contract service or not - Held that - The Apex court in the case of COMMISSIONER, CENTRAL EXCISE & CUSTOMS VERSUS M/S LARSEN & TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT has held that in the case of composite contracts which involved both supply of goods as well as provision of service, this would be classifiable only under Works Contract Service w.e.f. 01.06.2007. The Hon ble Apex Court has further held that for the period prior to 01.06.2007, composite contracts cannot be vivisected and charged to service tax under other categories. From the documents produced, it is evident that the activities carried out are in the nature of Works Contract and hence would be liable for service tax under Works Contract Service w.e.f. 01.06.2007 only and not for the prior period. Demand in respect of M/s. RMC - period of demand made is up to 31.03.2007 - Held that - The various works contracts executed by M/s. RMC will need to be scrutinized and verified before concluding that no service tax liability survives on the erection activity of transmission towers - matter remanded. Demand under the category of GTA Service from M/s RMC - Held that - This demand is not contested by M/s RMC and hence we uphold the same - interest also upheld. Appeal allowed in part and part matter on remand.

Summary

Issues Involved: Classification of services under 'Erection, Commissioning or Installation' and 'Works Contract Service'; Liability for service tax; Demand for interest under Section 75; Applicability of judgments on composite contracts.

Detailed Analysis:

1. Classification of Services - M/s. RMC and M/s. KLM Activities: The issue revolves around the classification of activities carried out by M/s. RMC and M/s. KLM under 'Erection, Commissioning or Installation' service. The lower authority classified the activities under this category, leading to a demand for service tax. However, the appellants argue that the activities should be classified as 'Works Contract Service' due to the nature of the contracts with telecom companies involving both supply of goods and erection of towers. The Hon'ble Supreme Court judgment in the case of Commissioner of C.Ex. & Customs, Kerala vs. Larsen & Toubro Ltd. is cited, stating that composite contracts are classifiable as 'Works Contract Service' from a specific date. The appellants present certificates supporting their claim that the activities are indeed 'Works Contracts.'

2. Liability for Service Tax - M/s. RMC and M/s. KLM: The liability for service tax on the activities of M/s. RMC and M/s. KLM is contested based on the classification of services. The demand for service tax was confirmed for M/s. RMC, but dropped for M/s. KLM by the adjudicating authority. The judgment emphasizes the need to verify the contracts to determine the nature of activities accurately. For M/s. RMC, the liability for service tax may not arise for the period before the introduction of Works Contract Service, requiring further scrutiny. The demand for service tax under 'Erection, Commissioning or Installation' service is set aside for both entities, and the matter is remanded for reevaluation.

3. Demand for Interest under Section 75: The Revenue challenges the omission of demanding interest under Section 75 for the service tax ordered to be paid by M/s. RMC. The appeal contends that interest for delayed payment was not included in the original order. The judgment upholds the demand for interest under Section 75 for M/s. RMC, in addition to the service tax and penalties already confirmed. The interest amount is specified and upheld, emphasizing the obligation for delayed payment of service tax.

4. Applicability of Judgments on Composite Contracts: The judgment extensively refers to the applicability of the Hon'ble Supreme Court's decision on composite contracts involving supply of goods and services. It highlights that such contracts are to be classified as 'Works Contract Service' from a specified date, and prior periods cannot be charged under different categories. The certificates provided by the appellants indicating 'Works Contracts' under the West Bengal Sales Tax Act further support their argument regarding the nature of activities carried out by M/s. RMC and M/s. KLM.

5. Conclusion and Orders: The judgment concludes by partially allowing the appeals, directing the adjudicating authority to reevaluate the classification of services for both M/s. RMC and M/s. KLM. The demand for service tax under 'Erection, Commissioning or Installation' service is set aside for both entities, and the matter is remanded for fresh consideration. The lower authority is instructed to finalize the matter within a specified timeframe due to the age of the issue. Cross objections are disposed of, and the orders are pronounced in the open court.