2019 (5) TMI 374 - AT - Service Tax

Short payment of service tax - Erection, Commissioning and installation service - service of Erection of Foundation of Tower and Commissioning and Installation of BTS of Mobile Towers for M/s. Nokia India Pvt. Ltd. and M/s. Ericsson India Pvt. Ltd. - HELD THAT - The Supreme Court in Larsen Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT examined whether service tax can be levied on indivisible works contract prior to the introduction of work contract service on 1 June 2007 by the Finance Act 2007 that expressly makes such contracts liable to service tax - In paragraph 17 of the judgment, the Supreme Court observed that the assessees were correct in their submission that the works contract is a separate species of contract distinct from contracts for services simpliciter recognised by the world of commerce and law as such, and has to be taxed separately as such . The Supreme Court ultimately held that prior to 01 June 2007 there was no charging section specifically levying the service tax only on works contract and prior to this date, service tax could be levied only on contracts simpliciter and not composite indivisible works contract. It is clear from the agreements entered into between the appellant and M/s. Nokia India Pvt. Ltd. and M/s. Ericson India Pvt. Ltd. that the contracts were indivisible works contract - In view of the decision of the Supreme Court, no levy of service tax could, therefore, be imposed prior to 1 June 2007. The appellant could not have been asked to discharge the service tax liability as no service tax could be levied on Works Contract Service prior to 1 June 2007. Service tax collected but not paid - HELD THAT - Section 73 A of the Finance Act which came into effect from 18 April 2006, provides a complete answer to this issue. Section 73 A deals with service tax collected from any person to be deposited with Central Government. While sub section (1) deals with service tax collected in excess of the service tax assessed or determined, sub section (2) deals with any person who has collected any amount which is not required to be collected from any other person, in any manner as representing service tax. Sub section (2) in such a situation would be applicable. Such a person is required to forthwith pay the amount so collected to the credit of the Central Government - Section 73 B deals with interest on amount collected in excess. The present is, therefore, clearly a case where the appellant had collected service tax which it was not required to collect in law . The appellant, therefore has to forthwith pay the amount so collected to the credit of the Central Government. Recovery of interest under sub-section (3) of the Section 73A - HELD THAT - The department could not have issued a notice under section 73 A of the Act as it is by this order that the Tribunal is holding that the appellant was not required to collect any service tax in law during the relevant period. We, therefore, leave it open to the Revenue to now proceed, if it so decides in accordance with the provisions of 73A and B of the Finance Act by issuing a notice under sub section (2) of 73 A of the Act. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Classification of services provided by the appellant.
2. Applicability of service tax on composite works contracts prior to 1 June 2007.
3. Collection and non-deposit of service tax by the appellant.
4. Legality of penalties and interest imposed.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Appellant:
The appellant was engaged in providing services for the installation of telecommunication towers, which included survey, design, planning, engineering, supply, installation, integration, testing, and commissioning of GSM equipment. The agreements with M/s. Nokia India Pvt. Ltd. and M/s. Ericsson India Pvt. Ltd. were examined, and it was found that the services provided were integral parts of Erection, Commissioning, or Installation Services.

2. Applicability of Service Tax on Composite Works Contracts Prior to 1 June 2007:
The Supreme Court in Larsen & Toubro Ltd. held that service tax could not be levied on composite indivisible works contracts before 1 June 2007. The appellant argued that their contracts were composite works contracts, and thus, no service tax liability should have arisen before 1 June 2007. The Tribunal agreed, stating that the contracts were indivisible works contracts, and in view of the Supreme Court's decision, no service tax could be imposed prior to 1 June 2007.

3. Collection and Non-Deposit of Service Tax by the Appellant:
The appellant collected service tax from M/s. Nokia India Pvt. Ltd. and M/s. Ericsson India Pvt. Ltd. but did not deposit it with the Government. The Tribunal noted that while the appellant could not be asked to discharge service tax liability due to the Supreme Court's ruling, they could not retain the collected service tax. Section 73A of the Finance Act, 1994, mandates that any collected amount representing service tax must be deposited with the Central Government.

4. Legality of Penalties and Interest Imposed:
The adjudicating authority imposed penalties and interest under various sections of the Finance Act, 1994. However, since the Tribunal held that no service tax could be levied on works contracts prior to 1 June 2007, the penalties and interest related to the service tax liability were set aside. The Tribunal allowed the Revenue to proceed under Section 73A to recover the collected amount with interest.

Conclusion:
The Tribunal set aside the impugned order dated 31 August 2012, which confirmed the demand of service tax and imposed penalties. The Revenue was granted liberty to proceed in accordance with Section 73A of the Finance Act to recover the collected service tax amount with interest. The appeal was allowed to the extent indicated, emphasizing that no service tax could be levied on composite works contracts prior to 1 June 2007, as per the Supreme Court's judgment in Larsen & Toubro Ltd.