2015 (10) TMI 2291 - AT - Service Tax

Tribunal quashes tax demand, penalties; works contracts not taxable pre-2007

M/s Punj Lloyd Ltd. Versus C.S.T., Delhi

The Tribunal quashed the adjudication order confirming a service tax demand, interest, and penalties, amounting to &8377;10,80,68,227/- under Sections ... Works Contract – Levy of tax prior to 1.06.2007 - Commercial or Industrial Construction Service – Appellant contended that work executed is taxable only with effect from 01.06.2007 not prior to it and CICS does not include indivisible works contract – Held That:- The contract involved is clearly a works contract as payments are to be made by ONGC during rendition of contract. Issue whether works contract is taxable under the category of CICS prior to 01.06.2007 is no longer res integra as decision made in case of CCE, Kerala Vs. M/s. Larsen & Toubro Ltd. & Anr [2015 (8) TMI 749 - SUPREME COURT] followed – Decided in favour of appellant. Issues:1. Confirmation of service tax demand, interest, and penalties.2. Nature of the works contract and its taxability under Commercial or Industrial Construction Service (CICS) prior to 01.06.2007.Analysis:Issue 1: Confirmation of service tax demand, interest, and penaltiesThe appellant appealed against an adjudication order confirming a service tax demand of &8377; 10,80,68,227/-, interest, and penalties under Sections 77 and 78 of the Finance Act, 1994. The appellant had remitted a portion of the tax amount. The impugned order also confirmed the demand towards the interest component and penalties. The appellant contested the proceedings, arguing that the services provided under the contract were indivisible works and not taxable under CICS before 01.06.2007.Issue 2: Nature of the works contract and its taxability under CICS prior to 01.06.2007The appellant entered into a lump sum contract with Oil and Natural Gas Corporation Ltd. (ONGC) for various works related to oil pipelines. The appellant contended that the works executed were indivisible works contract and became taxable only from 01.06.2007, hence not liable for tax prior to that date. However, the impugned order confirmed the demand, interest, and penalties. The Tribunal analyzed the agreement between the parties and concluded that the contract was a works contract. Referring to the Supreme Court judgment in CCE, Kerala Vs. M/s. Larsen & Toubro Ltd., the Tribunal held that works contract is taxable only from 01.06.2007 onwards and not before that date. The definition of CICS does not provide for tax levy on works contract before 01.06.2007.In light of the legal position established by the Supreme Court judgment, the Tribunal found the impugned order unsustainable and quashed it, allowing the appeal with no costs incurred.