2024 (8) TMI 398 - AT - Service Tax

Classification of services - indivisible works contract - commercial or industrial construction service or works contract services - services pertaining to construction of buildings, godowns, roads and railways etc and repair maintenance against work contracts/orders awarded by Government departments and PSUs namely CPWD, PWD, Railways, HAFED, HSWC and Haryana Police Housing Corporation etc. - HELD THAT - The issue is no longer res integra being decided in a catena of cases. In view of the judgment of Hon ble Apex Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT ; this Tribunal in the case of H P Singh Chadha vs. CGST, Ludhiana 2024 (1) TMI 680 - CESTAT CHANDIGARH has taken a view that indivisible work contract cannot be classified under commercial or industrial construction services . The demands confirmed by the impugned orders cannot be sustained and is set aside - appeal allowed.

Summary

Issues:
1. Classification of services provided by the appellant under taxable services.
2. Whether demands raised under "commercial or industrial construction services" are valid.
3. Applicability of penalty due to suppression, fraud, collusion, or wilful misstatement.

Analysis:

Issue 1: Classification of services provided
The appellant, a construction company, was engaged in providing services for construction and repair works. The department alleged that the appellant's services fell under "commercial or industrial construction" as per Section 65(25b) of the Finance Act, 1994. The appellant argued that the services provided to PSUs were not for commercial or industrial purposes but for storing agricultural produce. The appellant contended that the services were composite contracts and not separately identifiable. The appellant cited various case laws to support their argument, emphasizing that similar contractors were not paying service tax. The Tribunal noted that the works executed by the appellant were indivisible works contracts, and therefore, the demands should have been raised under "works contract services" rather than "commercial or industrial construction services."

Issue 2: Validity of demands under "commercial or industrial construction services"
The Tribunal referred to the judgment of the Hon'ble Apex Court in CCE, Kerala vs. Larsen & Toubro Ltd, which held that indivisible works contracts cannot be classified under "commercial or industrial construction services." Citing this precedent, the Tribunal concluded that the demands raised under "commercial or industrial construction services" could not be sustained. Therefore, the impugned orders confirming the demands were set aside, and the appeals of the appellant were allowed.

Issue 3: Applicability of penalty
The appellant argued that there was no suppression, fraud, collusion, or wilful misstatement on their part, as evidenced by the dropping of demands for subsequent periods by lower authorities. The appellant contended that penalty should not be imposed due to the absence of any such elements. The Tribunal did not explicitly address the penalty issue in its judgment, focusing primarily on the classification of services and the validity of demands under the relevant service category.

In conclusion, the Tribunal ruled in favor of the appellant, holding that the demands raised under "commercial or industrial construction services" were not valid due to the nature of the works executed being indivisible works contracts. The judgment emphasized the importance of correctly classifying services under the appropriate category for taxation purposes, as established by legal precedents.