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2022 (8) TMI 497 - AT - Service TaxClassification of services - construction of various infrastructural related projects like Rehabilitation National Games Village projects Sports Complex Construction Construction of Car Parking etc. pursuant to Works Contract - Commercial or Industrial Construction Services or Works Contract Services? - period from 2006-07 to 2010-11 - HELD THAT - It is noted that the contract is inclusive of supply of goods. The Ld. Commissioner while taking note of the fact that the construction services rendered by the Appellant is inclusive of supply of goods has extended the benefit of abatement to exclude the value of goods so as to arrive at the assessable value for raising demand of service tax. 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 Insofar as demand for subsequent period till 30th September 2008 is concerned even as the services rendered by assessee are taxable for the period from 1st June 2007 to 30th September 2008 the narrow confines of the SCN do not permit confirmation of demand of tax on any service other than commercial or industrial construction service . The instant demand of service tax under the category of Commercial or Industrial Construction cannot be sustained - Appeal allowed - decided in favor of appellant.
Issues:
1. Classification of construction services under "Commercial or Industrial Construction Services" or "Works Contract Service" 2. Applicability of abatement benefit for excluding the value of goods in construction projects 3. Taxability of construction projects funded by Centrally Sponsored Schemes 4. Limitation period for the demand of service tax 5. Imposition of penalty and interest Analysis: 1. Classification of construction services: The appeal involved a dispute regarding the classification of construction services provided by the Appellant under "Commercial or Industrial Construction Services" or "Works Contract Service." The Appellant argued that since the contract included the supply of goods, it should be classified under the latter category. The Ld. Commissioner had confirmed the demand of service tax under "Commercial or Industrial Construction Services," extending the benefit of abatement at the rate of 67%. The Appellant relied on legal precedents to support their contention that works contract services cannot be taxed under "Commercial Construction Service." 2. Abatement benefit: The Ld. Commissioner extended the benefit of abatement to exclude the value of goods in the construction projects for determining the assessable value for service tax. The Appellant contested this decision, emphasizing that the abatement should be considered in the context of works contract services rather than commercial construction services. The Tribunal examined the issue in detail, citing legal provisions and judgments to support the conclusion that the demand of service tax under "Commercial or Industrial Construction" could not be sustained. 3. Taxability of projects funded by Centrally Sponsored Schemes: The Appellant argued that the construction activities undertaken were funded by the 'Centrally Sponsored Scheme,' indicating a non-commercial purpose. They presented various Tribunal decisions to support their claim that construction activities funded by the government or municipalities should not be primarily considered for commercial purposes. The Hon'ble Karnataka High Court's decision was also cited to emphasize the nature and objective of such schemes for the welfare of the nation/states. 4. Limitation period and penalty: The Appellant contested the demand on the grounds of limitation, highlighting the absence of willful suppression or fraud to evade service tax payment. Additionally, the imposition of penalty and interest was challenged. However, the detailed judgment primarily focused on the classification issue, the applicability of abatement, and the taxability of construction projects under specific service categories. 5. Final Decision: After considering the arguments from both sides and examining the legal aspects of the case, the Tribunal concluded that the demand of service tax under the category of "Commercial or Industrial Construction" could not be sustained. The appeal was allowed, setting aside the demand, and providing consequential relief as per the law. The decision was pronounced in the open court on 08 August 2022.
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