Tribunal rules on service tax for construction services, emphasizing unity of works contracts

The Tribunal set aside the lower authorities' decision on service tax liability for commercial or industrial construction services from September 2004 to March 2006. Relying on the judgment in Larsen & Toubro Ltd., it held that works contracts cannot be vivisected for taxation under different service categories. The Tribunal allowed the appeal, providing clarity on the taxation of works contracts and emphasizing that they remain as such both before and after the relevant introduction of works contract services.

---

---

Issues involved: Service tax liability for the period September 2004 to March 2006 under the category of commercial or industrial construction services.

Analysis:

The appeal was directed against Order-in-Appeal No. P-II/AV/130/2010, dated 6-8-2010 passed by the Commissioner of Central Excise (Appeals), Pune. The issue revolved around the service tax liability for the mentioned period under commercial or industrial construction services. The appellant contended that they had entered into a contract for commercial construction works by a work order for various entities and claimed it as works contract services. The lower authorities demanded service tax under the category of commercial construction services. The appellant cited a judgment by the Apex Court in the case of Larsen & Toubro Ltd. to support their argument that the impugned order was unsustainable.

The Departmental Representative reiterated the findings of the lower authorities, highlighting the absence of contract copies in the appeal memorandum. Both sides presented their arguments, with the lower authorities proceeding on the understanding that the contracts could be vivisected for service tax liability under commercial or industrial construction services. The appellants had registered under works contract service from 20-8-2007, claiming that activities before this date were not taxable. The first appellate authority had ruled that services provided by the appellants for construction of commercial and industrial buildings were taxable under commercial or industrial construction services before the introduction of works contract services on 1-6-2007.

The Tribunal referred to the judgment in the case of Larsen & Toubro Ltd., where it was held that works contract remains a works contract both before and after 1-6-2007, and cannot be vivisected for taxation under other service categories. Consequently, the Tribunal held that the impugned order was unsustainable, setting it aside and allowing the appeal with consequential relief. The decision was based on the settled law by the Apex Court, providing clarity on the taxation of works contracts.

---