2019 (3) TMI 1504 - AT - Service Tax

Works Contract Service - Erection, Commissioning and Installation Services - levy of service tax - Held that - The period involved is 2006-07 and it is stated therein that the works include provision of services along with supply of materials. The demand is raised in SCN and confirmed in the impugned order under ECIS. From the impugned order it is seen that the adjudicating authority has held that some of the contracts are not of composite nature observing that certain invoices only show the supply of material and VAT paid whereas certain invoices do not show materials supplied. We do not think such a vivisection can be made. The nature of the contract or work executed for the customer has to be looked into to consider whether it is a composite contract involving both supply of material and supply of service - The Hon ble Apex Court in the case of M/s. Larsen & Toubro Ltd., 2015 (8) TMI 749 - SUPREME COURT has held that for the period prior to 01.06.2007, the demand in respect of contracts of composite nature cannot sustain. The demands confirmed under ECIS where the works executed are of composite in nature involving both supply of materials and provision of services, the demand requires to be set aside - the entire demand under ECIS, which involves both labour and materials prior to 01.06.2007 is set aside. For the period after 01.06.2007, for all the amounts which have been confirmed under ECIS, wherein, the contracts are of composite nature involving both supply of materials and provision of services the demand cannot sustain as per the decision of the Tribunal in the case of M/s. Real Value Promoters. Pvt Ltd., 2018 (9) TMI 1149 - CESTAT CHENNAI . As such, the demands after 1/6/2007 under the category of ECIS for composite contracts are set aside. Penalties - Held that - The issue whether composite contracts are subject to levy of service tax was contentious during the relevant period. Taking note of this fact that the issue being interpretational one, the penalties imposed in regard to the demands confirmed under WCS after 1/6/2007 is unwarranted and requires to be set aside, which we hereby do. Thus, the penalties imposed in regard to WCS after 01.06.2007 are set aside in toto. The demand under ECIS for M/s. Dalmia Cements Ltd., is remanded for considering the cum-tax benefit - appeals are partly allowed and partly remanded.

Summary

Issues:
1. Classification of services provided by the appellant under Works Contract Services.
2. Liability to pay service tax under Erection, Commissioning, and Installation Services (ECIS).
3. Contention regarding demand confirmed under ECIS and Works Contract Services.
4. Joint and several liability of two proprietorship concerns owned by the same individual.
5. Penalties imposed on the appellant.
6. Cum-tax benefit for services provided to M/s. Dalmia Cements Ltd.

Classification of services provided by the appellant under Works Contract Services:
The appellants provided services of installation of electrical devices to various clients and were registered under Works Contract Services. The investigation revealed that the services fell under Erection, Commissioning, and Installation Services (ECIS) as per the Finance Act, 1994. The demand for service tax was proposed for the period from 16.06.2005 to 31.03.2010. The original authority confirmed the demand under ECIS and Works Contract Services, imposing penalties and interest. The demand was made on the proprietor of the appellant entities.

Liability to pay service tax under Erection, Commissioning, and Installation Services (ECIS):
The appellant contested the demand under ECIS, arguing that certain works were pure labor contracts and should be classified under Repair and Maintenance Services (RMS). The appellant also challenged the demand post-01.06.2007 under ECIS, citing a Tribunal decision. However, the appellant conceded the liability for Works Contract Services post-01.06.2007 but requested the penalties to be set aside due to the contentious nature of the issue during that period.

Contention regarding demand confirmed under ECIS and Works Contract Services:
The adjudicating authority confirmed demands under ECIS and Works Contract Services for different periods. The Tribunal set aside demands under ECIS for composite contracts pre-01.06.2007 and post-01.06.2007 based on the nature of the contracts. The demand under Works Contract Services post-01.06.2007 was upheld, but penalties were set aside due to the interpretational nature of the issue.

Joint and several liability of two proprietorship concerns owned by the same individual:
The two proprietorship concerns owned by the same individual were held jointly liable for the service tax demand. Separate appeals were filed, and the liability was imposed on the individual owning both concerns.

Penalties imposed on the appellant:
The penalties imposed on the appellant were set aside for demands confirmed under Works Contract Services post-01.06.2007 due to the interpretational nature of the issue during that period.

Cum-tax benefit for services provided to M/s. Dalmia Cements Ltd.:
The demand in respect of services provided to M/s. Dalmia Cements Ltd. was upheld, but the matter was remanded to consider cum-tax benefit as the service tax was not separately collected from the client.

This judgment partially allowed the appeals, setting aside penalties and demands for certain periods and issues while upholding the liability for others.