2014 (1) TMI 197 - AT - Service Tax

Tribunal rejects Revenue's bid to split service contracts for abatement calculation

The Tribunal ruled in favor of the appellants, rejecting the Revenue's contention to split the service contracts into three components for abatement ... Demand of service tax - Abatement of 67% in respect of the construction activity - Assessee claimed abatement in respect of other activities - Held that:- prima facie service could not be split into three components. In the case of material supplied free of cost, there are many such disputes pending before the High Court of Delhi and the Court has granted stay against enforcing demands based on arguments given by Revenue in this case. So we waive pre-deposit of dues arising from the impugned order for admissions of appeal. There shall be stay on collection of such dues during the pendency of the appeal - Stay granted. Issues:Interpretation of service contracts involving multiple components for abatement calculation under Notification No. 1/2006-S.T.Analysis:The case involved the appellants providing services to oil companies for civil work specified in contracts. The Revenue contended that the contracts comprised three components: supply of manpower, construction of buildings, and maintenance/repair of buildings. A Show Cause Notice was issued, alleging that the appellants could only claim abatement for construction activity, not for other activities. The demand of Rs. 42,29,560/- was confirmed for the period 1-10-2003 to 31-10-2008.The Counsel for the appellant clarified that the manpower was utilized to execute the contract without a separate agreement for supplying manpower. He argued that the mentioned manpower in the contract was for labor used in construction work. Additionally, he highlighted that maintenance and repair activities were often part of the construction work, falling under industrial construction.On the other hand, the Ld. AR failed to demonstrate how the values for the three components were determined by the adjudicating authority in composite contracts. It was mentioned that disputes regarding material supplied free of cost were pending before the Hon'ble High Court of Delhi, with a stay granted against enforcing demands based on similar arguments presented in this case.After considering both arguments, the Tribunal did not agree with the Revenue's claim of splitting the service into three components. Regarding the material supplied free of cost issue, the Tribunal noted the pending disputes and the stay granted by the High Court. Consequently, the Tribunal waived the pre-deposit of dues arising from the order and imposed a stay on the collection of such dues during the appeal's pendency.