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2018 (11) TMI 1466 - AT - Service TaxCommercial or industrial construction service - non-payment of service tax - case of appellant is that they fall under the category of works contract service involving execution of composite contracts and not liable to pay service tax - Held that - The contract entered between the appellant and the service recipient is a composite contract which involves both supply of materials as well as rendering of service. The Tribunal in the case of Real Value Promoters Ltd. 2018 (9) TMI 1149 - CESTAT CHENNAI had occasion to analyse the issue regarding demand of service tax under construction of residential complex services, commercial or industrial construction service and construction of complex service. The Tribunal has held that prior to 1.6.2007, levy of service tax can be under the above categories only for contracts which are purely for services. That after 1.6.2007, the above categories would be applicable only if the contracts are purely services and which are not composite contracts. Further, it was held that after 1.6.2007, demand in respect of composite contracts would fall under works contract service only. The demand of service tax under commercial or industrial construction service (residential complex) cannot sustain after the period 1.6.2007 - The levy of service tax prior to 1.6.2007 cannot also sustain by application of the decision of the Hon ble Supreme Court in the case of Larsen & Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT . Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Classification of the service provided by the appellant. 2. Applicability of service tax on composite contracts prior to and after 1.6.2007. 3. Validity of the demand raised under a different service category than proposed in the show cause notice. Detailed Analysis: 1. Classification of the Service Provided by the Appellant: The appellant, a qualified engineer, provided construction services to M/s. BSNL from 2005-06 to 2008-09. The central issue was whether these services fell under 'commercial or industrial construction service' or 'works contract service'. The original authority confirmed the demand under 'commercial or industrial construction service', but the Commissioner (Appeals) reclassified the service under 'works contract service' for the period after 1.6.2007. 2. Applicability of Service Tax on Composite Contracts Prior to and After 1.6.2007: The Tribunal referenced the case of Real Value Promoters Ltd. Vs. CCE, which established that prior to 1.6.2007, service tax could only be levied on contracts that were purely for services. Composite contracts, which involve both supply of materials and services, were not taxable under 'commercial or industrial construction service' before this date. After 1.6.2007, such composite contracts fell under 'works contract service' as defined under section 65(105)(zzzza). This was further supported by the Supreme Court's decision in Larsen & Toubro, which clarified that composite contracts could not be taxed under service categories meant for service simpliciter. 3. Validity of the Demand Raised Under a Different Service Category Than Proposed in the Show Cause Notice: The appellant argued that the Commissioner (Appeals) exceeded the scope of the show cause notice by confirming the demand under 'works contract service' instead of 'commercial or industrial construction service'. The Tribunal agreed, referencing multiple decisions, including the case of URC Construction (P) Ltd. Vs. Commissioner of Central Excise, which held that service tax on composite contracts prior to 1.6.2007 could not be levied under 'commercial or industrial construction service'. For the period after 1.6.2007, the service tax liability could only be under 'works contract service' if the contract was composite. Conclusion: The Tribunal concluded that the demand of service tax under 'commercial or industrial construction service' could not be sustained after 1.6.2007. The levy of service tax prior to 1.6.2007 was also unsustainable based on the Supreme Court's decision in Larsen & Toubro. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief. Operative Portion: The operative portion of the order was pronounced in open court, affirming the Tribunal's decision to set aside the impugned order and allow the appeal.
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