2023 (5) TMI 82 - AT - Service Tax

Levy of Service Tax - Construction of Residential Complex Service - construction service in respect of residential complex namely Vicenza Repreat having more than 12 units - case of the department is that the appellant failed to obtain service tax registration for the same and also failed to pay the service tax and filing of ST-3 returns for the said period - HELD THAT - There is no dispute on the fact that the appellant have been providing the construction of residential complex along with material and they have paid the VAT to the State Government. In this regard, they have also produced the VAT returns. In this fact, there is no doubt that the service provided by the appellant is of Works Contract. It is also the fact that the appellant even before 01.06.2007 right from the beginning providing the service of Works Contract i.e. Construction of Residential Complex along with Material under payment of VAT. The hon ble Supreme Court clearly held in COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT that Works Contract Service prior to 01.06.2007 cannot be levied with service tax. Since the levy became effective from 01.06.2007, the appellant have correctly obtained the registration and started paying service tax under Works Contract Service. The reason for denial of Works Contract Service by the learned Commissioner (Appeals) is that the appellant should opt for the Works Contract Service - this option can be exercised only when the assessee wish to shift from one service to Works Contract Service which is not the case here. The appellant have been providing Works Contract Service right from the beginning i.e. before 01.06.2007 therefore, on the very same service with effect from 01.06.2007, the service tax is leviable under Composition Scheme i.e. Works contract Service therefore, the appellant have rightly not paid the service tax before 01.06.2007 and correctly paid the service tax under Works contract Service with effect from 01.06.2007 therefore, the demand in the present case is not sustained. Appeal allowed.

Summary

Issues involved:
The issues involved in this case are related to the failure of the appellant to obtain service tax registration for providing construction services, the demand of service tax along with interest and penalty, and the denial of the benefit of the composition scheme of Works Contract Service.

Issue 1: Failure to obtain service tax registration and payment:
The appellant received a significant amount for providing construction services but failed to obtain service tax registration, pay the service tax, and file ST-3 returns for the relevant period. A show cause notice was issued proposing a demand for service tax, interest, and penalty. The order-in-original confirmed this notice, leading to the appeal by the appellant.

Issue 2: Denial of composition scheme for Works Contract Service:
The appellant argued that they were providing Works Contract Service even before the introduction of service tax on Works Contract on 01.06.2007. The appellant contended that they had paid VAT to the State Government for the service provided. The Commissioner (Appeals) denied the benefit of the composition scheme on the grounds that the appellant did not specifically opt for Works Contract Service. The appellant maintained that they were providing Works Contract Service from the beginning and that the option to switch services was not necessary in their case.

In the judgment, the Tribunal considered the submissions and records. It was acknowledged that the appellant had been providing construction services along with material and paying VAT to the State Government. The service provided by the appellant was deemed to be Works Contract Service, even before 01.06.2007. Referring to relevant judgments, including L & T Ltd., the Tribunal noted that Works Contract Service prior to 01.06.2007 could not be levied with service tax. As the appellant correctly registered and started paying service tax under Works Contract Service from 01.06.2007, the demand for service tax before this date was deemed unsustainable. The Tribunal held that the appellant rightfully paid service tax under the Works Contract Service and set aside the impugned order, allowing the appeal.

This judgment highlights the importance of correctly categorizing services for tax purposes and the significance of following legal procedures in obtaining registrations and paying taxes. The decision provides clarity on the application of the composition scheme for Works Contract Service and emphasizes the need for consistency in service classification.