2019 (1) TMI 1432 - AT - Service Tax

Construction of Industrial complexes services - Finishing and completion services - Short payment of service tax - wrong availment of abatement provided under Notification No. 1/2006-ST dated 01.03.2006 - non-payment of service tax on recipient portion - period from November, 2006 to 10/2007 and from 01/2007 to 12/2007 - Held that - Issue decided by the Bench in the case of M/s/ Real Value Promoters Pvt. Ltd. & Ors. Vs. Commissioner of G.S.T. & Central Excise, Chennai & Ors. 2018 (9) TMI 1149 - CESTAT CHENNAI , where it was held that The services provided by the appellant in respect of the projects executed by them for the period prior to 1.6.2007 being in the nature of composite works contract cannot be brought within the fold of commercial or industrial construction service or construction of complex service - For the period after 1.6.2007, service tax liability under category of commercial or industrial construction service‟ under Section 65(105)(zzzh) ibid, Construction of Complex Service‟ under Section 65(105)(zzzq) will continue to be attracted only if the activities are in the nature of services‟ simpliciter - the issue being identical, the above ruling squarely applies to the case on hand - demand set aside. Works Contract Services - Demand of ₹ 29,58,712/- (06/2007 to 02/2008) under WCS with interest thereon - Held that - It is a fact borne out of the records that the assessee had charged service tax in their bills raised on customers, the service tax liability against which is ₹ 29,58,712/-, payable for the work undertaken between June 2007 and November 2008. Out of the above service tax liability, assessee has discharged a sum of ₹ 25,00,000/- on 11.02.2009. It is clear from the appeal memo that the assessee-appellant has not disputed the findings of the Ld. Commissioner that there was no dispute as to classification - there are no reason to interfere with the above findings of the Ld. Commissioner and hence, the same is held to be in order. Imposition of penalty - Held that - The Delhi Bench of the Tribunal in the case of Siddha Projects Pvt. Ltd. 2017 (4) TMI 36 - CESTAT NEW DELHI has set aside the penalty imposed under Sections 76 and 78 of the Finance Act, 1994 invoking the provisions of Section 80 of the Act - following the same, the penalty is set aside. Appeal allowed in part.

Summary

Issues Involved:
1. Wrong availment of abatement under Notification No. 1/2006-ST.
2. Non-payment of service tax on certain payments.
3. Classification of services under Commercial or Industrial Construction Service (CICS) vs. Works Contract Service (WCS).
4. Imposition of penalties under Sections 76 and 78 of the Finance Act, 1994.

Detailed Analysis:

1. Wrong Availment of Abatement:
The appellant was found to have short-paid service tax due to the wrong availment of abatement under Notification No. 1/2006-ST dated 01.03.2006. The Department issued a Show Cause Notice proposing to demand service tax of ?64,26,673/- along with interest and penalties. The lower adjudicating authority confirmed a demand of ?62,67,700/- after appropriating amounts already paid by the appellant. The appellant contended that the contracts were composite in nature, involving supply of materials, and hence liable to service tax only under WCS after 01.06.2007. Reliance was placed on the Supreme Court's decision in C.C.E. Vs. L&T Ltd. and the CESTAT Chennai's decision in M/s. Real Value Promoters Pvt. Ltd.

2. Non-payment of Service Tax:
The appellant did not pay service tax on payments where recipients did not agree to pay the service tax portion. The lower authority imposed a penalty of ?63,00,000/- under Section 78 but dropped the penalty under Section 76. The appellant argued that the demand under CICS was not sustainable as the contracts involved supply of materials, making them liable under WCS.

3. Classification of Services:
The appellant argued that the services provided were composite works contracts and should be classified under WCS, not CICS. The Tribunal referenced the Supreme Court's decision in Larsen & Toubro, which held that composite works contracts involving both service and supply of goods were not liable to service tax under CICS prior to 01.06.2007. The Tribunal also cited multiple CESTAT decisions supporting the view that composite works contracts should be classified under WCS post-01.06.2007.

4. Imposition of Penalties:
The Tribunal noted that the Delhi Bench of the CESTAT in Siddha Projects Pvt. Ltd. had set aside penalties under Sections 76 and 78 by invoking Section 80 of the Finance Act, 1994. Following this precedent, the Tribunal set aside the penalty imposed on the appellant.

Conclusion:
1. Demands of ?30,97,659/- (November 2006 to October 2007) and ?14,81,177/- (January 2007 to December 2007) under CICS were set aside.
2. Demand of ?29,58,712/- (June 2007 to February 2008) under WCS was upheld with interest.
3. Penalty imposed was set aside.
4. The appeal was partly allowed on these terms.