2019 (1) TMI 503 - AT - Service Tax

Composite works contract - Commercial and Industrial Construction Services - site formation and clearance, excavation, earth moving and demolition service - period 10.09.2004 to 31.03.2007 and 16.06.2005 to 31.03.2007 - demand of service tax with interest and penalty - Held that - In respect of the work categorized as site formation and clearance, excavation, earth moving and demolition services . The appellants have produced a certification from VAT Authority in Annexure-D and VAT was charged accordingly on the taxable turn over, taxable sales and taxable sales of capital goods. The work undertaken by the appellants is a composite contract - as the works undertaken are composite contracts the ratio of the decision in the case of L&T 2015 (8) TMI 749 - SUPREME COURT is squarely applicable and the demands for the period before 01.06.2007 are not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of services for assessment under Kerala VAT and demand of tax under Section 78 of the Finance Act, 1994 for the period before 01.06.2007.

Analysis:
The appellants, engaged in civil construction works, were issued a Show Cause Notice (SCN) regarding the classification of their services as "Commercial and Industrial Construction Services" and "site formation and clearance, excavation, earth moving and demolition service" for specific periods. The Commissioner confirmed the demand of tax and imposed a penalty under Section 78, which was paid by the appellants. The appellants contended that the services provided were composite contracts involving both services and transfer of property in goods. They relied on a certificate issued by the Kerala VAT Authority and argued that the taxability of such contracts under the Finance Act, 1994, could only be under works contract service introduced from 01.06.2007. Therefore, they claimed that the demands for the period before 01.06.2007 were not sustainable based on the decision of the Hon'ble Supreme Court in the case of CCE Vs. Larsen & Toubro Ltd.

The Ld. counsel for the appellants presented evidence, including a certification from the VAT Authority, to support their claim that the services provided were composite contracts. The Commissioner had also allowed an abatement of 67% on the taxable value, recognizing the composite nature of the contracts where the gross amount charged included the value of all goods and materials supplied. The Tribunal found that the works undertaken by the appellants were indeed composite contracts, and the decision in the case of Larsen & Toubro Ltd. was applicable. Consequently, the demands for the period before 01.06.2007 were deemed unsustainable, leading to the penalties being not sustainable as well.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal with any consequential relief. The operative portion of the order was pronounced in Open Court on 14/12/2018.