2022 (11) TMI 862 - AT - Service Tax

Levy of service tax - work contract service - entire case of the department is based only on the contract between appellant and buyer of RMC - HELD THAT - As per the contract, the entire transaction is of Works Contract. However, the appellant is mainly engaged in the manufacture of Ready-Mix-Concrete and selling the same to various buyers. As per the nature of product, it is necessary to supply RMC in a specialized container and after reaching at the customer s site RMC is delivered by carrying out the process of pouring, pumping and laying of concrete at the customer s place. The RMC cannot be unloaded at a particular place and thereafter shifted the same to a different particular place at site. Due to peculiar nature of RMC, it is unavoidable to deliver at particular place where the RMC is required to be laid-down. It is also the fact that appellant being manufacturer of RMC, paying excise duty not only on the value of the goods but also on the value of service of pumping, laying of concrete and the same is included in the sale value. Therefore, no value is escaped from payment of excise duty. Accordingly, the entire activity right from the manufacturing of RMC and delivery at the site of the customer is excisable activity. Merely because the contract says that it is works contract, the actual nature of transaction cannot be overlooked. The manufacturing activity of RMC cannot be covered under Works Contract by any stretch of imagination. Therefore, even though there is contract of Works Contract basically for the purpose of VAT Act, cannot be applied in the present transaction of manufacture and sale of goods in terms of Section 2(f) of Central Excise Act, 1944 - the department cannot take two stands, in one hand manufacturer for demanding excise duty and on the same activity, on the other hand demanding service tax under Works Contract - the activity of the appellant is predominantly of manufacture and sale of goods. Accordingly, the same cannot be charged with service tax under Works Contract service. Service tax demand on supply of tangible goods service - HELD THAT - The appellant has put forward the contention that it would be within the threshold limit. The details of rent collected covered by the show cause notice for the year 2016-17 is of Rs. 1,50,000/- and 2015-16 is NIL. It would go to show that the amount related to supply of tangible goods service is within the threshold limit of exemption of service tax provided under the Notification 33/2012-ST. dated 20.06.2012 - the demand of service tax on the supply oftangible goods services also cannot sustain and requires to be set aside. Levy of service tax - legal services under reverse charge mechanism - HELD THAT - Appellant is contesting the said demand only on limitation and submitted the copy of departmental audit report in support of their arguments - the demand is set aside on the ground of time bar. The appeal is allowed.

Summary

Issues:
1. Classification of activity as Works Contract service and liability to pay service tax.
2. Applicability of Central Excise Duty on the manufacturing of Ready-Mix-Concrete.
3. Service tax demand on renting of tangible goods service.
4. Service tax demand on legal services under reverse charge mechanism.

Issue 1: Classification of activity as Works Contract service and liability to pay service tax:
The case involved the appellant engaged in manufacturing Ready-Mix-Concrete (RMC) and undertaking the activity of laying RMC using concrete pumping at the buyer's site. The department contended that the activity falls under Works Contract service and is liable to service tax. The appellant argued that as they pay Central Excise duty on the complete value of RMC, no value escapes excise duty. The Tribunal held that the nature of the transaction cannot be overlooked, emphasizing that the manufacturing activity of RMC cannot be covered under Works Contract as per the Finance Act, 1994. Various judgments supported the view that the activity is predominantly of manufacturing and sale of goods, not subject to service tax under Works Contract service.

Issue 2: Applicability of Central Excise Duty on the manufacturing of Ready-Mix-Concrete:
The appellant contended that the cost of RMC includes all incidental and ancillary services value, and they have already paid Central Excise duty on the complete value. The Tribunal noted that the appellant pays excise duty not only on the goods' value but also on the value of services like pumping and laying of concrete. The Tribunal emphasized that the department cannot demand service tax under Works Contract when excise duty has already been collected on the entire value of RMC, including services.

Issue 3: Service tax demand on renting of tangible goods service:
The appellant argued that they are eligible for a small-scale service provider exemption due to their engagement solely in the manufacture of RMC. The Tribunal found that the amount related to the supply of tangible goods service was within the threshold limit of exemption under the relevant Notification, leading to the demand of service tax on this service being set aside.

Issue 4: Service tax demand on legal services under reverse charge mechanism:
Regarding the demand on legal services under reverse charge, the appellant contended that it was time-barred based on audit reports. The Tribunal agreed with the appellant's arguments and set aside the demand on the grounds of being time-barred.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal with consequential reliefs, if any, in accordance with the law. The judgment highlighted the importance of distinguishing between manufacturing activities and works contract services for tax liabilities, ensuring that excise duty payments on goods and services are duly considered to prevent double taxation.