2023 (6) TMI 593 - AT - Service Tax

Classification of services - Commercial and Industrial Construction service or Works contract service - providing services such as laying, jointing and testing pipes for water supply/drainage/effluent pipeline/ MLD water scheme, etc. provided to Gujarat Industrial Development Corporation - benefit of abatement under Notification No.1/2006-CE dated 01.03.2006 - invocation of Extended Period of Limitation - HELD THAT - The appellant have been providing service of laying down of pipes for drainage, water supply, affluent, etc. The work undertaken by the appellant is of the composite nature involving both supply of the goods as well as service. The appellants have classified their service under the Works Contract Service and has paid service tax. The work orders which have been executed by the appellant for Gujarat Industrial Development Corporation have been perused by us and we find that the work orders involved supply of pipes for water supply, drainage as well as laying the same as per the engineering drawings. Thus, it is accepted that that the activity undertaken by the appellant involves both supply of material as well as service - It has also been claimed by the learned advocate that they have paid VAT/service tax on the goods supplied by them to M/s. GIDC. In view of the above facts, it is convincing that the activity undertaken by the appellant is properly classifiable under Works Contract Service and since they have already paid service tax under the Works Contract Service, the Order-In-Original is found devoid of merit - the service provided by the appellant is rightly classifiable under the category of Works Contract Service as defined under Section 65 (105)(zzzza) of the Finance Act, 1994. Extended period of Limitation - HELD THAT - On taking note of the fact that the assessee has been regularly filing their service tax returns under the Works Contract Service as well as they have entered into a correspondence with the department during August 2008 upto 20th October 2008 and therefore, there are no element of fraud, collusion or wilful mis-statement or suppression of facts are involved therefore, the demand is barred by limitation and deserves to be set aside on limitation ground also. Appeal allowed.

Summary

Issues:
The issues involved in the judgment are the classification of services provided by the appellant under Works Contract Service, availing abatement under Notification No.1/2006, payment of service tax, and the applicability of extended time period for demand under the show cause notice.

Classification of Services under Works Contract Service:
The appellant was engaged in laying, jointing, and testing pipes for water supply, drainage, and affluent pipeline for Gujarat Industrial Development Corporation (GIDC). The department contended that this activity falls under Commercial and Industrial Construction service. The appellant argued that their work was a composite contract involving both supply of material and service component of laying down pipes, correctly classified under Works Contract Service. They cited a case law to support their classification and claimed that the activity for GIDC falls under the exclusion clause of Works Contract Service, thus no service tax is applicable. The Tribunal found that the appellant's activity was properly classifiable under Works Contract Service as they had paid service tax under this category.

Abatement under Notification No.1/2006 and Payment of Service Tax:
The department alleged that the appellant availed abatement under Notification No.1/2006 without fulfilling necessary conditions, resulting in short payment of service tax. The appellant disputed this claim, stating that they paid service tax under Works Contract Service for the income earned from the GIDC work. They argued that they had regularly filed ST-3 returns and disclosed their income, thus the demand was barred by limitation. The Tribunal noted that the appellant had paid VAT/service tax on goods supplied to GIDC and had properly classified their service under Works Contract Service, finding the Order-In-Original devoid of merit.

Applicability of Extended Time Period for Demand:
The show cause notice covered the period from 2007-08 to 2010-11, invoking the extended time period under Section 73(1) of the Finance Act, 1994. The appellant contended that the demand was barred by limitation as they had regularly filed service tax returns and corresponded with the department regarding their activities. The Tribunal agreed, finding no element of fraud or suppression of facts, and set aside the demand on limitation grounds.

Conclusion:
The Tribunal held that the appellant's services were rightly classified under Works Contract Service, the demand under the show cause notice was barred by limitation, and the Order-In-Original was devoid of merit. Therefore, the appeal was allowed, and the impugned order was set aside.