2016 (3) TMI 999 - AT - Service Tax

Tribunal Decision: Service Tax Upheld for Installation Services, Construction Services Liability Set Aside

The Tribunal upheld the demand for Service Tax under Installation & Commissioning Services but set aside penalties. Regarding Construction Services ... Installation and Commissioning services - Construction services - Works contract - Service Tax liability prior to 01.06.2007 - Penalty under Section 73(3) of the Finance Act, 1994Installation and Commissioning services - Penalty under Section 73(3) of the Finance Act, 1994 - Service Tax demand in respect of Installation & Commissioning services for the period 01.07.2003 to 31.03.2004 and the penalty imposed thereon. - HELD THAT: - The parties do not dispute that the appellant rendered Installation & Commissioning services during the period in question and that Service Tax together with interest was discharged by the appellant before issuance of the show-cause notice. The Tribunal upholds the portion of the impugned order confirming the demand and interest, because tax liability on those services is established. However, since the tax and interest were paid prior to the show-cause notice, imposition of penalty is unwarranted. The tribunal applies the principle in Section 73(3) of the Finance Act, 1994, as settled by earlier Tribunal authorities, to set aside the penalty imposed in respect of these services.Demand and interest confirmed for Installation & Commissioning services; penalty set aside.Construction services - Works contract - Service Tax liability prior to 01.06.2007 - Whether the works executed by the appellant for construction of retail outlets from 10.09.2004 attract Service Tax under Construction or Commercial/Industrial Services. - HELD THAT: - The contract with IOCL required the appellant to supply all materials and execute the job, which the Tribunal characterises as a 'works contract'. Relying on the ratio of the Hon'ble Supreme Court in Larsen & Toubro Ltd., the Tribunal observes that prior to 01.06.2007 no Service Tax liability arises on works contract jobs under the other service categories. Applying that principle, the Tribunal holds that the demand of Service Tax under Construction/Commercial or Industrial Services in respect of the work from 10.09.2004 cannot be sustained. Consequentially, the penalties based on that demand are also set aside.Service Tax demand under Construction/Commercial or Industrial Services for the works contract from 10.09.2004 set aside; consequential penalties also set aside.Final Conclusion: The appeal is allowed in part: the Service Tax demand and interest for Installation & Commissioning services are sustained but penalties relating thereto are set aside; the Service Tax demand and consequential penalties in respect of the works contract construction from 10.09.2004 are set aside in view of the rule that no Service Tax arises on works contracts prior to 01.06.2007. Issues:1. Whether the services rendered by the appellant during a specific period constitute 'Installation & Commissioning services' and 'Construction services' for the purpose of Service Tax liability.Analysis:The appeal in question was against an Order-in-Appeal passed by the Commissioner of Central Excise (Appeals), Mumbai Zone -I. The primary issue for consideration was whether the services provided by the appellant between 2003-2004 fell under 'Installation & Commissioning services' and subsequently under 'Construction services' from 10.9.2004 onwards, thereby attracting Service Tax liability. The appellant was executing a contract for the construction of new retail outlets and related works for Indian Oil Corporation Ltd. It was established that the appellant had also rendered Installation & Commissioning Services during the relevant period.The appellant had already discharged the Service Tax liability for Installation & Commissioning Services before the show-cause notice was issued and did not dispute the same. However, regarding the construction works, the appellant argued that Service Tax liability under 'Works Contract services' was introduced only from 01.06.2007, citing a precedent from Larsen & Toubro Ltd. The Departmental Representative contended that penalties should be imposed as the Service Tax liability was paid after being pointed out by Investigating Authorities.The Tribunal found that the Service Tax liability for Installation & Commissioning Services, along with interest, had been settled by the appellant before the show-cause notice was issued. Therefore, penalties imposed on this aspect were deemed unwarranted, in line with Section 73(3) of the Finance Act, 1994. The Tribunal upheld the demand with interest but set aside the penalties. Concerning the Service Tax liability for construction works from 10.09.2004 onwards, it was established that the job executed by the appellant constituted a 'works contract,' and the liability for Service Tax under 'Commercial or Industrial Services' did not arise before 01.06.2007, as per the precedent set by Larsen & Toubro Ltd. Consequently, the demand for Service Tax and penalties under this category were also set aside.In conclusion, the Tribunal disposed of the appeal by upholding the demand for Service Tax under Installation & Commissioning Services but setting aside the penalties. The demand for Service Tax under Construction Services from 10.09.2004 onwards was also set aside, along with the associated penalties.