2023 (7) TMI 434 - AT - Service Tax

Classification of services - works contract services or not - benefit of the composition scheme issued by a notification dated 22.05.2007 - Validity of SCN - SCN did not even specify whether the services provided by the appellant would fall under the category of WCS or CICS - extended period of limitation - penalties. Validity of SCN - SCN did not even specify whether the services provided by the appellant would fall under the category of WCS or CICS - HELD THAT - It is clear that the demand was proposed without specifying a particular taxable category in terms of section 65(105) of the Finance Act. The confirmation of demand on the basis of the aforesaid show cause notice, therefore, is not justified. In this connection reliance can be placed on the decision of the Delhi High Court in THE PRINCIPAL COMMISSIONER, SERVICE TAX, DELHI- VERSUS SHUBHAM ELECTRICALS 2016 (5) TMI 1055 - DELHI HIGH COURT , wherein it was held As rightly pointed out by the CESTAT, the Department itself is unclear whether the service performed by the respondent was management, maintenance or repair service or Erection, Installation and Commissioning Services . This vagueness goes to root of the matter. Works contract service or not - HELD THAT - On a perusal of sample work orders submitted by the appellant it also transpires that work orders include the charge supply of goods and fixing and finishing of tiles/granite/marbles by L T. The activity undertaken by the appellant, being composite in nature, shall, therefore, have to be classified as WCS for the reason that the Supreme Court in COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT held that the composite contracts are rightly classifiable under work contract services . Whether the appellant has correctly availed the benefit of the composition scheme for discharging service tax liability on WCS for the period after 01.06.2007? - HELD THAT - Mere non-intimation about the option for paying service tax under the composition scheme is a procedural lapse and substantial benefit cannot be denied. In this connection, it would be pertinent to refer the decision of the Tribunal in M/S. AREVA T D INDIA LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, CHENNAI 2021 (10) TMI 187 - CESTAT CHENNAI , wherein it was held that non-intimation of availing the composition scheme is a condonable lapse and the payment of service tax under the composition scheme cannot be denied for WCS. Extended period of limitation - HELD THAT - For the period 01.04.2007 to 30.09.2007 the demand is even beyond the period of 5 years. This amount comes to Rs. 73,321/-. For the period from 01.10.2007 to 25.10.2010 the demand is for the extended period of limitation. The demand for the period from 01.10.2010 to 31.03.2012 is within limitation. This demand comes to Rs. 09,07,352/- - Though much has been argued on behalf of the appellant that the extended period of limitation could not have been invoked in the facts and circumstances of the case, but it would not be necessary to decide this issue as the demand itself cannot be sustained. Appeal allowed.

Summary

Issues Involved:
1. Vagueness of the Show Cause Notice (SCN) regarding the classification of services.
2. Classification of services under 'Works Contract Services' (WCS) or 'Commercial or Industrial Construction Services' (CICS).
3. Eligibility for the composition scheme for discharging service tax liability.
4. Invocation of the extended period of limitation for service tax demand.

Summary:

1. Vagueness of the Show Cause Notice:
The appellant contended that the SCN was vague as it did not specify whether the services provided fell under WCS or CICS. The Tribunal agreed, noting that the SCN did not clearly classify the services under section 65(105) of the Finance Act, rendering the confirmation of demand unjustified. The Tribunal cited the Delhi High Court's decision in Principal Commissioner, Service Tax, Delhi vs. Shubham Electricals, emphasizing that such vagueness goes to the root of the matter.

2. Classification of Services:
The appellant argued that the services provided were composite in nature, involving both supply of goods and services, and should be classified under WCS. The Tribunal, upon examining sample work orders, agreed that the activities were composite and should be classified as WCS, referencing the Supreme Court's decision in L & T which held that composite contracts are classifiable under WCS.

3. Eligibility for Composition Scheme:
The appellant claimed eligibility for the composition scheme for discharging service tax liability on WCS post 01.06.2007. The Tribunal noted that the appellant had paid service tax with interest after availing the composition scheme. The Tribunal held that non-intimation of availing the composition scheme is a procedural lapse and cannot deny substantial benefits, citing the Tribunal's decision in M/s. Areva T&D India Limited vs. Commissioner of Central Excise & Service Tax.

4. Extended Period of Limitation:
The appellant contended that the extended period of limitation should not have been invoked. The Tribunal bifurcated the demand into various periods and found that the demand for the period 01.04.2007 to 30.09.2007 was beyond 5 years and time-barred. The demand for the period from 01.10.2010 to 31.03.2012 was within the limitation period. The Tribunal concluded that the demand itself could not be sustained for the reasons stated, rendering the issue of the extended period of limitation moot.

Conclusion:
The Tribunal set aside the order dated 29.11.2016 passed by the Commissioner (Appeals) and allowed the appeal, concluding that the SCN was vague, the services should be classified under WCS, the appellant was eligible for the composition scheme, and the demand was not sustainable.