2023 (6) TMI 312 - AT - Service Tax

Classification of services - construction of Jiribam Municipal Corporation building, staff quarter building, Guest House building, overhead tank and R. wall etc. for meeting social needs of the state of Manipur and for upliftment of needy people of the state in terms of the contract awarded by NBCC on behalf of the Ministry of Urban Employment and Poverty Alleviation, Govt. of India - to be classified under Commercial Or Industrial Construction Services or Works Contract Service? - taxability under the category of Works Contract Service has not been proposed in the impugned Show Cause Notice - time limitation. 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 service is inclusive of supply of goods has extended the benefits 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 URC Construction (P) Ltd. 2017 (1) TMI 1363 - CESTAT CHENNAI has observed that In view of this specific decision and the admitted claim of the appellant that they are not providers of commercial or industrial construction service but of works contract service , no tax is liable on construction contracts executed prior to 1st June, 2007. 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. Since the appeal is being decided on merits for the reasons stated above, we refrain from making any observation on the issue of limitation. Appeal allowed.

Summary

Issues involved: Determination of Service Tax liability under the category of 'Commercial or Industrial Construction Services' for the period 2005-06, and consideration of whether the contract should be classified as 'Works Contract Service' instead.

Summary:

Issue 1: Service Tax liability under 'Commercial or Industrial Construction Services' category

The appeal was filed against the Order-in-Original confirming the demand of Service Tax for the period 2005-06. The construction projects undertaken were for social needs and funded by the government. The Ld.Commissioner confirmed the demand of Service Tax under the category of 'Commercial or Industrial Construction Services' and extended the benefit of abatement. The Appellant argued that the construction was not for commercial purposes and should be classified under 'Works Contract Service.' They cited relevant judgments to support their claim. The Ld. Authorized Representative for the Revenue supported the findings of the Ld. Commissioner.

Issue 2: Classification under 'Works Contract Service'

The Tribunal examined the issue of classification based on the presence of supply of goods in the contract. Referring to previous judgments, the Tribunal concluded that the contracts were composite in nature involving both goods and services. The Tribunal noted that the demand for subsequent periods did not invoke the taxable entry for 'Works Contract Service,' and therefore, the demand for Service Tax under the category of 'Commercial or Industrial Construction Services' could not be sustained. The appeals were allowed with consequential relief as per law.

This summary highlights the key issues involved in the legal judgment and provides a detailed overview of the Tribunal's decision for each issue.