2024 (1) TMI 1058 - AT - Service Tax

Eligibility for abatement of 67% of gross value under the Notification No. 1/2006-ST - Classification of services - Commercial and Industrial Construction Service - Finishing and Completion work or not - works executed by the appellant in the nature of false ceiling, partitions, flooring, modular systems, painting, carpeting, electrical connected works wall paneling, supply and fixing of various furniture, brick works etc. - HELD THAT - There is ample evidence to show that the appellant has used goods and materials in construction service which are composite in nature. So also, from the different work orders we have no confusion to conclude that these are not completion and finishing service so as to get excluded from the ambit of Notification No. 1/2006-ST. It also requires to be mentioned that the Tribunal in its earlier Final Order dated 02.07.2014, had remanded the matter with specific direction to the Adjudicating Authority to verify and scrutinize documents furnished by the appellant with regard to their claim of abatement in spite of such directions, the Adjudicating Authority has denied the benefit of abatement with observing that appellant has not produced details of site-wise/ bill-wise for the purchase of materials. This observation is highly erroneous and not acceptable. The Tribunal while analyzing a similar situation in the case of M/S. OCEAN INTERIOR LIMITED VERSUS COMMISSIONER OF G.S.T. CENTRAL EXCISE, CHENNAI 2019 (11) TMI 124 - CESTAT CHENNAI observed that when there is sufficient evidence to establish that the appellant has purchased materials for execution of work and also paid VAT on such goods, the department cannot deny abatement and demand service tax on entire gross amount received. In the present case also, the appellant has produced VAT returns to show that they have paid VAT on the materials used in the execution of work orders. Similarly in the case of M/S RAJ INTER DECOR PRIVATE LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, AND SERVICE TAX, DELHI-III 2023 (7) TMI 1180 - CESTAT CHANDIGARH the Tribunal while considering the eligibility of abatement of 67%, as per Notification No. 01/2006-ST held that in case of construction services of composite nature, abatement has to be granted. Thus, appellant has used goods and material for execution of construction work. The allegation of the department that the works are entirely Completion and Finishing service is factually and legally incorrect - the appellant is eligible for abatement. Following the ratio of decisions cited, it is opined that the demand raised cannot sustain. Accordingly the impugned order is set-aside. Appeal allowed.

Summary

Issues Involved:
1. Eligibility for abatement of 67% under Notification No. 1/2006-ST.
2. Classification of services under Works Contract Service.
3. Eligibility for exemption benefit under Notification No. 12/2003-ST.

Summary:

1. Eligibility for Abatement of 67% under Notification No. 1/2006-ST:
The appellant, registered under Commercial and Industrial Construction Service (CICS), availed abatement of 67% under Notification No. 1/2006-ST and paid service tax on 33% of the gross value. The department contended that the appellant's activities, such as false ceiling, partitions, flooring, and other finishing works, fall under 'Finishing and Completion work' as per sub-clause (c) of Section 25(b) of the Finance Act, 1994, and thus, not eligible for the abatement. The original authority confirmed the demand, interest, and penalties, rejecting the appellant's claim for abatement due to insufficient documentary evidence linking material purchases to specific clients.

2. Classification of Services under Works Contract Service:
The appellant argued that their activities involved substantial construction, renovation, and modification, constituting a composite works contract service. They asserted that approximately 78-80% of the contract value consisted of material purchases, with VAT paid on these materials, which was not disputed. The appellant contended that post-01.06.2007, their transactions should be taxed under "Works Contract Service" with an option to pay service tax at 2% under the Works Contract Composition Scheme. The Tribunal noted that the appellant's contracts were composite and not merely completion and finishing services, thus eligible for abatement.

3. Eligibility for Exemption Benefit under Notification No. 12/2003-ST:
The appellant claimed exemption under Notification No. 12/2003-ST for the value of goods and materials sold during the provision of services. The department rejected this claim, citing the appellant's failure to produce site-wise/bill-wise records. The Tribunal referenced similar cases, such as Ocean Interior Limited and Raj Inter Décor Private Limited, where it was held that abatement should be granted for composite construction services involving material usage. The Tribunal found ample evidence that the appellant used goods and materials in their services and paid VAT on these materials, thus eligible for the abatement.

Conclusion:
The Tribunal concluded that the appellant's activities were composite in nature, involving substantial material usage, and not merely completion and finishing services. The appellant was eligible for the abatement under Notification No. 1/2006-ST and the exemption benefit under Notification No. 12/2003-ST. The demand raised by the department was set aside, and the appeal was allowed with consequential relief.