2019 (1) TMI 1434 - AT - Service Tax

Scope of SCN - Works contract services or Construction services - appellants were issued show cause notices proposing to demand service tax under Works Contract Services. After due process of law, the original authority confirmed the demand under Construction of Residential Complex Services - Held that - The appellant was discharging the service tax under Construction of Residential Complex. However, the SCN has been issued proposing to demand under Works Contract Services. After adjudication, the Commissioner held that the services are rightly classifiable under Construction of Residential Complex Services and confirmed the demand raised in the SCN under Works Contract Service - The Commissioner has traveled beyond the scope of the SCN and such confirmation of demand on a different category of service is not sustainable. The issue whether composite contracts involving both element of services as well as supply of goods would fall under Commercial or Industrial Construction Services / Residential Complex Services was analysed by the Tribunal in the case of Real Value Promoters Pvt Ltd. And others 2018 (9) TMI 1149 - CESTAT CHENNAI and the Tribunal held that such composite contracts would not fall under the category of Commercial or Industrial Construction Services / Residential Complex Services and can be classified only under Works Contract Services - thus, the confirmation of demand under Construction of Residential Complex Services is un-sustainable and requires to be set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Classification of services under Works Contract Services or Construction of Residential Complex Services.
2. Scope of show cause notice in confirming demand under a different category of service.
3. Applicability of composite contracts under Commercial or Industrial Construction Services / Residential Complex Services.

Analysis:
1. The appellants were issued show cause notices proposing to demand service tax under Works Contract Services, but the original authority confirmed the demand under Construction of Residential Complex Services. The appellant argued that their works were in the nature of composite contracts involving both supply of materials and renting of services, and thus should not fall under Construction of Residential Complex Services. They cited a Tribunal decision supporting their argument. The Commissioner's classification under Construction of Residential Complex Services was deemed unsustainable as it went beyond the show cause notice. The Tribunal set aside the confirmation of demand and allowed the appeal with consequential reliefs.

2. The Commissioner's decision to confirm the demand under Construction of Residential Complex Services, deviating from the show cause notice proposing Works Contract Services, was found to be unsustainable. The Tribunal held that the department did not appeal against this decision, indicating the lack of merit in the Commissioner's classification. The confirmation of demand on a different category of service was considered not legally sustainable, leading to the order being set aside.

3. The issue of whether composite contracts involving both services and supply of goods fall under Commercial or Industrial Construction Services / Residential Complex Services was analyzed in a previous Tribunal case. The Tribunal in that case concluded that such composite contracts should be classified only under Works Contract Services. Relying on this precedent, the Tribunal deemed the confirmation of demand under Construction of Residential Complex Services as unsustainable and set aside the impugned order. The Miscellaneous Application filed by the department for a change of cause title was allowed, providing further relief in the judgment.