2022 (1) TMI 450 - AT - Service Tax

CENVAT Credit - Works contract service or Commercial or Industrial Construction Services - claim of the appellant is that period prior to 01.06.2007 the works contract services was not chargeable to service tax - HELD THAT - CBEC in letter DOF No. 334/1/2008- TRU dated 29.02.2008, is of the view that if VAT is paid under the category of Works Contract then the service should be classified as works contract services. In the instant case while the appellant has submitted the challans under which VAT has been paid but it cannot be ascertained from the said challans if the VAT has been paid under category of Works Contract . While the registration document shows the appellant was registered under works contract with Sale tax authorities. The learned counsel could not establish from the said records that the sales tax or VAT was paid under the head of works contract service though prima facie is claim appears to be correct. The matter is remanded to the Original Adjudicating Authority to ascertain if the VAT/Sales tax has been paid for all the contracts under the category of works contract. If the appellant has paid VAT/Sales Tax under the head of Works contract then the service would fall under the category of Works Contract Service. No demand under the category of Commercial Industrial Construction Service can be confirmed - appeal allowed by way of remand.

Summary

Issues:
Denial of Cenvat Credit, demand of interest, imposition of penalty under Notification No. 01/2006 for finishing and completion work.

Analysis:
The appeal pertained to M/s Western Corrosion Controller challenging the denial of Cenvat Credit, interest demand, and penalty imposition under Notification No. 01/2006 for services provided during 16.06.2005 to 31.03.2010. The issue revolved around whether the services qualified as finishing and completion work, thereby affecting the applicability of the service tax exemption. The appellant argued that their activities constituted Works Contract, citing the absence of service tax on works contracts pre-01.06.2007 as per a Supreme Court decision. They contended that their services were classified as Works Contract Service, supported by their registration under this category with Sales Tax Authorities in Gujarat. The appellant also referenced CBEC Circular No. 334/1/2008-TRU, which linked VAT payment under Works Contract to the classification of services as works contract services.

The Adjudicating Authority raised a demand under Commercial or Industrial Construction Services, contrary to the appellant's claim that post-01.06.2007, their services fell under Works Contract Service. The Tribunal reviewed specific contracts involving activities like painting/coating structures and concrete work to prevent corrosion, asserting that these services aligned with Works Contract Service. Referring to a CBEC letter, the Tribunal highlighted that VAT payment under Works Contract indicated the classification of services as works contract services. However, the challenge arose as the appellant's VAT payment details did not explicitly specify payment under the Works Contract category, despite registration under this classification.

Consequently, the Tribunal set aside the impugned order and remanded the matter to the Original Adjudicating Authority for verification of VAT/Sales tax payments under the Works Contract category for all contracts. If VAT/Sales Tax was indeed paid under Works Contract, the services would be categorized as Works Contract Service, precluding any demand under Commercial & Industrial Construction Service. Additionally, no duty demand pre-01.06.2007 could be upheld, considering the non-taxability of works contract services during that period as per the Larsen and Toubro Ltd case. The appeal was allowed for remand based on the above considerations.