Tribunal rules in favor of appellant, finding service tax demand unsustainable. Abatement and Composition Scheme applied. Extended time demand unjustified.

The tribunal ruled in favor of the appellant, finding that the demand for service tax was not sustainable. The appellant was deemed eligible for abatement under Notification No. 1/06-ST and the Works Contract Composition Scheme. Additionally, the tribunal concluded that the invocation of the extended time period for demand was not justified. As a result, the impugned order was set aside, and the appeal was disposed of in favor of the appellant, with the stay application also being disposed of.

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Issues Involved:
1. Classification of services under "Works Contract Services" (WCS) versus "Erection, Commissioning and Installation" (ECI).
2. Eligibility for abatement under Notification No. 1/06-ST.
3. Availment of Cenvat credit on input services.
4. Invocation of extended time period for demand.

Detailed Analysis:

1. Classification of Services under WCS vs. ECI:
The appellant provided services categorized as "Works Contract Services" (WCS) and "Erection, Commissioning and Installation" (ECI). The revenue's primary contention was that the contracts should be classified under ECI rather than WCS. For M/s. Air Liquide North India Pvt. Ltd., it was alleged that the appellant changed the classification from ECI to WCS, which is not permissible under Rule 3(3) of the Composition Scheme. However, the tribunal found that the appellant never changed the classification to WCS and continued to pay service tax under ECI after taking abatement of 67% from April 2008 onwards. The tribunal held that the revenue's assumption was without basis and that the ECI service involved substantial supply of materials, thus justifying the classification under WCS.

2. Eligibility for Abatement under Notification No. 1/06-ST:
For M/s. Air Liquide North India Pvt. Ltd., the tribunal found that the appellant was eligible for abatement of 67% under Notification No. 1/06-ST. The appellant had availed input service credit of Rs. 2,69,580/-, which they reversed, making them eligible for the abatement. The tribunal relied on judgments such as B.G. Shirke Technology, Khyati Tours & Travels, and Ramkrishna Travels, which held that once the credit is reversed, the benefit of the notification would be available. The tribunal concluded that denying the abatement for a small amount of initially availed and later reversed credit would be unjust.

3. Availment of Cenvat Credit on Input Services:
The tribunal addressed the issue of Cenvat credit availed by the appellant on input services. For the contracts with MCC PTA India Corporation Pvt. Ltd. and SAIL ISSCO Steel Plant, the tribunal found that substantial materials were supplied as part of the contracts, and the appellants had paid service tax on the entire value, including materials. The tribunal held that the appellants were eligible for the Works Contract Composition Scheme, as they had not taken Cenvat credit on inputs, only on input services, which is permissible. The tribunal noted that the revenue's argument that the contracts were purely service activities was incorrect, as substantial materials were involved.

4. Invocation of Extended Time Period for Demand:
The tribunal examined the invocation of the extended time period for the demand. It found that there was no suppression of facts or misdeclaration by the appellant. The service tax payments were reflected in the ST-3 returns, and the wrong classification of service could not be considered as suppression. The tribunal cited the case of Indian Institute of Chemical Technology, where it was held that wrong classification does not constitute suppression of facts. The tribunal concluded that the extended time period was not invocable in this case.

Conclusion:
The tribunal set aside the impugned order, holding that the demand of service tax was not sustainable. The appellant was found eligible for the abatement under Notification No. 1/06-ST and the Works Contract Composition Scheme. The tribunal also ruled that the invocation of the extended time period was not justified. The appeal was disposed of in favor of the appellant, and the stay application was also disposed of.

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