2019 (6) TMI 69 - AT - Service Tax

Classification of services - Commercial or Industrial Construction Service - works contract‛ w.e.f. 01.06.2007 - Composition scheme - HELD THAT - The issue in dispute is squarely covered by the case laws cited by him, in particular, that of the Hon ble Apex Court in COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT for the period upto 01.06.2007 where it was held that Works contract were not chargeable to service tax prior to 1.6.2007 - For the period after 01.06.2007, the Chennai Bench of the CESTAT in the case of REAL VALUE PROMOTERS PVT. LTD., CEEBROS PROPERTY DEVELOPMENT, PRIME DEVELOPERS VERSUS COMMISSIONER OF GST CENTRAL EXCISE, CHENNAI 2018 (9) TMI 1149 - CESTAT CHENNAI have extrapolated the ratio laid down by the Hon ble Apex Court in M/s.Larsen Toubro Ltd. and held that even after 01.06.2007, service tax liability for composite contracts can only be demanded under Works Contract Service and not under CICS etc. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Reclassification of services for tax purposes from 'Commercial or Industrial Construction Service' to 'Works contract'.
2. Validity of demand for service tax, interest, and penalties under various provisions of law.
3. Interpretation of composite contracts involving service provision and transfer of property in goods.
4. Applicability of service tax liability under Works Contract Service post 01.06.2007.

Analysis:
1. The appellants, engaged in construction business, reclassified their services under 'Works contract' from 'Commercial or Industrial Construction Service' post the introduction of the service category 'works contract' from 01.06.2007. The department objected to this reclassification and issued a show cause notice proposing service tax demand, interest, and penalties under various provisions of law.

2. The adjudicating authority confirmed the service tax demand, interest, and imposed penalties under Sections 76 and 78 of the Finance Act, 1994. The appellants appealed against this order.

3. During the hearing, the appellant's advocate cited the Supreme Court's decision in the case of CCE & Cus., Kerala Vs L&T Ltd. and a recent decision of the Tribunal to support the contention that composite contracts involving service provision and transfer of property in goods cannot be covered under 'Commercial or Industrial Construction Service'.

4. The Tribunal found merit in the appellant's argument, citing the case laws mentioned, especially the decision of the Hon'ble Apex Court for the period up to 01.06.2007. It was noted that post 01.06.2007, service tax liability for composite contracts can only be demanded under Works Contract Service and not under 'Commercial or Industrial Construction Service'.

5. Referring to a Chennai Bench decision, the Tribunal extrapolated the ratio laid down by the Hon'ble Apex Court and held that demanding tax liability under 'Commercial or Industrial Construction Service' for a composite contract post 01.06.2007 is not valid. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential benefits as per law.