2024 (3) TMI 594 - AT - Service Tax

Short payment of service tax - Commercial and Industrial Construction Services - constructions provided to Educational institutions - construction of commercial and industrial complexes - Department was of the view that the assessee has short paid service tax under CICS for the reason that Educational Institutions also fall under the category of CICS - denial of benefit of Notification No.01/2006 for the construction services rendered to spinning mills (Construction of Commercial / Industrial Complexes) - HELD THAT - The construction services for the entire period are in the nature of composite services, which involves both supply of materials as well as rendering of services. Being composite services, the demand for the period prior to 01.06.2007 cannot be sustained under CICS as decided by the Hon ble Apex Court in the case of Larsen and Toubro 2015 (8) TMI 749 - SUPREME COURT . For the period after 01.06.2007 the Tribunal in the case of Real Value Promoters Ltd., 2018 (9) TMI 1149 - CESTAT CHENNAI has held that the demand can be only under Works Contract Services - In the case of Real Value Promoters, the Tribunal held that the demand for the period prior to 01.07.2012 can be made only under WCS and the demand made under CICS (RCS) etc., cannot be sustained. In the present case for the entire period the demand is raised under CICS. As per the definition of CICS in the Finance Act 1994 Sec 65 (25b) , it does not specify that a contract which involves transfer of property in goods would fall under this category. Whereas, the definition of Works Contract Services introduced w.e.f. 1.6.2007 specifies that when the execution of contract involves both transfer of property in goods and rendering of services, such activity would fall under WCS. In present case, all the works executed are composite in nature involving both transfer of property in goods and rendering of services. Therefore, the demand has to be under WCS only. Denial of benefit under Notification No. 1/2006 alleging that the assessee has received free supplies of materials - HELD THAT - The Hon ble Supreme Court in the case of CST Vs. Bhayana Builders (P) Ltd., 2018 (2) TMI 1325 - SUPREME COURT has held that even if the assessee receives free supplies, the benefit of abatement as per the Notification cannot be denied - the decision passed by Commissioner in Order-in-Original No. 04/2019 dated 28.06.2019 dropping the demand in respect of construction services rendered to spinning mill is legal and proper. Appeal disposed off.

Summary

Issues involved:
The judgment involves issues related to the demand of service tax for construction services provided to educational institutions and spinning mills, as well as the applicability of Notification No. 01/2006.

Issue 1: Construction services to educational institutions
The period involved in the appeals ranged from April 2005 to March 2012. The demand was raised under the category of 'Commercial and Industrial Construction Services' (CICS) for constructions provided to educational institutions. The Tribunal analyzed the nature of the services provided, considering them as composite services involving both supply of materials and rendering of services. It was held that for the entire period, the demand should be under Works Contract Services (WCS) rather than CICS. The Tribunal referred to previous judgments, including the case of Real Value Promoters, to support this conclusion. The demand raised under CICS was deemed unsustainable and was set aside.

Issue 2: Construction services to spinning mills
For the period from 2005 to March 2010, a demand was raised on construction services provided to spinning mills, denying the benefit under Notification No. 1/2006 due to alleged receipt of free supplies of materials. The Tribunal referred to the case law of CST Vs. Bhayana Builders (P) Ltd., which held that even if free supplies were received, the benefit of abatement under the Notification cannot be denied. The Tribunal found the decision to drop the demand in respect of construction services to spinning mills as legal and proper.

Conclusion:
The judgment sustained the impugned order in one appeal related to construction services to educational institutions, dismissing the department's appeal. In the other appeals concerning construction services to spinning mills, the impugned orders were set aside. As a result, the appeals filed by the assessee were allowed with consequential relief, while the department's appeal was dismissed.