2015 (2) TMI 708 - AT - Service Tax

Tribunal grants stay and waives pre-deposit for appellant in property transfer dispute

The Tribunal ruled in favor of the appellant, waiving the pre-deposit and granting a stay on further proceedings. The appellant's argument that the ... Waiver of pre-deposit - Works Contract Service - demand of service tax from principal contractor whereas work was executed by the sub-contractor under the 'back to back basis' agreements - Held that:- Reliance for this contention is placed on the decision of the Supreme Court in Larsen & Tourbo Ltd. & Ors [2008 (8) TMI 21 - SUPREME COURT]. The Supreme Court clarified that in a construction works contract, the property used in the construction of a building/project passes from the builder to the owner of the land on which the building is constructed when the goods or materials used are incorporated in the building and that is so, even if there is no privity of contract between the contractee and the sub-contractor, since the deemed transfer of property in goods is based on the principle of accretion of property in goods. On the basis of the law declared by Hon'ble Supreme Court supra, it prima facie appears that no 'works contract service' was provided by the appellant to the Government of Andhra Pradesh since it was the sub-contractors who transferred the property in goods to the State Government by the process accretion of such goods into the property of State Government, during execution of works contract by the sub-contractors. - stay granted. Issues:Service tax demand on works contract service provided to the Government of Andhra Pradesh.Analysis:The appeal was filed against an adjudication order confirming a service tax demand of Rs. 17,46,14,485/- on the appellant for providing 'Works Contract Service' to the Government of Andhra Pradesh under three agreements. The appellant argued that the activities did not fall within the definition of 'works contract service' as per Section 65(105)(zzzza) of the Finance Act, 1994, citing the decision of the Supreme Court in State of Andhra Pradesh & Ors Vs. Larsen & Tourbo Ltd. & Ors. The Supreme Court clarified that in a construction works contract, the property used in construction passes from the builder to the owner of the land when goods or materials are incorporated in the building, even without privity of contract between the contractee and sub-contractor.The appellant, as the principal contractor, had entered into agreements with the Government of Andhra Pradesh for the works contract and then entered into 'Back to Back' agreements with sub-contractors for execution. The total works were executed under these agreements. The adjudicating authority confirmed the service tax demand, considering the works as a 'works contract', which was not disputed by the appellant. However, the appellant argued that the property in goods was transferred to the State Government by the sub-contractors during the execution of works contracts, based on the principle of accretion of property in goods.The Tribunal found a strong prima facie case in favor of the appellant, considering the Supreme Court's decision and the transfer of property in goods by the sub-contractors to the State Government. As a result, the Tribunal waived the pre-deposit in full and granted a stay on all further proceedings pending the disposal of the appeal.