2022 (8) TMI 471 - AT - Service Tax

Classification of supply (service includes supply of goods) - Commercial or Industrial Construction Services - contract is inclusive of supply of goods - availability of benefits of abatement to exclude the value of goods so as to arrive at the assessable value for raising demand of service tax - HELD THAT - The issue has already been examined in detail by the Tribunal in the case of M/S. URC CONSTRUCTION (P) LTD. VERSUS COMMISSIONER OF CENTRAL, SALEM 2017 (1) TMI 1363 - CESTAT CHENNAI where it was held that even as the services rendered by them are taxable for the period from 1st June, 2007 to 30th September, 2008 the narrow confines of the show cause notices do not permit confirmation of demand of tax on any service other than commercial or industrial construction service. Since the issue is no longer res-integra, the instant demand of service tax under the category of Commercial or Industrial Construction cannot be sustained and hence, set aside - appeal allowed - decided in favor of appellant.

Issues:
1. Classification of construction services under service tax laws.
2. Applicability of abatement in determining taxable value.
3. Taxability of works contract services.
4. Invocation of taxable entry in show cause notice.
5. Scope of taxability of works contract service pre and post-June 2007.

Analysis:

Issue 1: Classification of construction services under service tax laws
The case involved an appeal by M/s. Simplex Projects Limited against an order confirming demand of service tax by the Ld. Commissioner for the periods 2005-06 and 2008-09. The dispute centered around the classification of services under the category of 'Commercial or Industrial Construction Services'. The Ld. Commissioner extended the benefit of abatement to exclude the value of goods in determining the taxable value. The Appellant contended that the services should be classified under 'Works Contract Service', citing relevant legal precedents and contractual provisions.

Issue 2: Applicability of abatement in determining taxable value
The Ld. Commissioner applied abatement to exclude the value of goods in determining the taxable value for service tax assessment. The Appellant argued that since the contract included the supply of goods, the classification under 'Commercial or Industrial Construction Services' was incorrect, and the services should be classified under 'Works Contract Service'.

Issue 3: Taxability of works contract services
The Appellant contended that they were providers of 'works contract service' and not liable to tax under 'Commercial or Industrial Construction Services'. Legal arguments were presented based on the interpretation of relevant legal provisions and judgments, including the distinction between service contracts and composite works contracts.

Issue 4: Invocation of taxable entry in show cause notice
The Appellant raised concerns regarding the invocation of the taxable entry in the show cause notice, arguing that the demand of service tax could not be sustained for the period subsequent to a certain date due to the specific classification of services not being proposed in the notice.

Issue 5: Scope of taxability of works contract service pre and post-June 2007
The Tribunal analyzed the taxability of 'works contract service' both before and after June 2007, based on legal interpretations and precedents. The Tribunal referred to relevant judgments and legal provisions to determine the tax liability of the services provided by the Appellant. The Tribunal concluded that the demand of service tax under the category of 'Commercial or Industrial Construction Services' could not be sustained and set it aside.

In conclusion, the Tribunal allowed the appeals filed by M/s. Simplex Projects Limited, providing consequential relief as per law. The judgment clarified the classification of construction services under service tax laws and the applicability of abatement in determining the taxable value, emphasizing the taxability of works contract services and the importance of invoking the correct taxable entry in show cause notices.

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