2019 (5) TMI 149 - AT - Service Tax

Classification of service - composite works contract for construction of houses for Tsunami affected victims - Works Contract service or construction of residential complex service? - HELD THAT - The documents evidencing supply of material were not produced before the adjudicating authority. This being the case, we are unable to conclude whether contract was indeed within the fold of works contract service involving supply of both materials and labour. In the circumstances, the matter is remanded to the adjudicating authority for the limited purpose of going through the documents that may be produced by the appellants in support of the claim that materials had also been supplied by them. Penalty - HELD THAT - As the said issue was mired in litigation, we hold that even if any amount of tax is confirmed in such denovo adjudication, there shall be no penalty under the Finance Act, 1994. Appeal allowed by way of remand.

Summary

Issues:
Liability to service tax in the construction of a residential complex service, classification of the contract as a composite works contract, production of documents evidencing the supply of materials, imposition of penalty under the Finance Act, 1994.

Liability to Service Tax:
The issue in dispute revolved around the liability to service tax concerning the construction of a residential complex service by the appellant. A show-cause notice was issued proposing a demand amount with interest under the category of construction of a residential complex service and the imposition of penalties under various provisions of the law. The impugned order confirmed the demand, interest, and penalties, leading to the appeal.

Classification of Contract:
During the hearing, the appellant argued that the contract with M/s. Kottar Social Service Society was a composite works contract for constructing houses for Tsunami-affected victims. The appellant contended that the show-cause notice should have been issued under Works Contract Service instead of construction of a residential complex service. The appellant cited legal precedents, including a decision by the Hon’ble Apex Court and a Tribunal decision, to support their argument.

Production of Documents:
The respondent opposed the appeal, highlighting that the appellants had not provided any bills, invoices, or work orders to prove that the total contract value for constructing tsunami houses included the cost of all materials used in the project. The lack of documentation raised doubts about whether the contract involved both the supply of materials and labor.

Imposition of Penalty:
After considering both sides, the Tribunal found that documents evidencing the supply of materials were not presented before the adjudicating authority. Consequently, the Tribunal remanded the matter to the adjudicating authority to review any documents that the appellants might produce to support their claim that materials were supplied. If it is established that the contract was a composite contract involving both materials and labor, the demand under the category of Residential Complex Service would not be sustainable. The Tribunal also ruled that no penalty would be imposed under the Finance Act, 1994, given the litigation involved in the issue.

In conclusion, the appeal was allowed by way of remand, emphasizing the need for a re-adjudication considering the documents supporting the supply of materials and providing the appellants with a fair opportunity to present their contentions.