Appellants not liable for service tax pre-2007. Composition scheme applies post-2007. Section 78 penalty revoked. Appeal partly allowed.

The Tribunal ruled that the appellants were not liable to pay service tax before 1.6.2007 and had fulfilled their tax liability under the composition scheme for the period from 1.6.2007 to 31.3.2008. Consequently, there was no additional tax liability beyond what had already been paid. The penalty under section 78 was revoked due to the complexity of the issue. The appeal was partly allowed based on these findings.

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Issues:
Taxability of completion and finishing services under Commercial or Industrial Construction Service for the period June 2005 to March 2008. Applicability of service tax prior to 1.6.2007. Eligibility for composition scheme for works contract services from 1.6.2007 to 31.3.2008. Discharge of tax liability under composition scheme. Imposition of penalty under section 78 of the Finance Act, 1994.

Analysis:

1. Taxability of Completion and Finishing Services:
The appellants provided completion and finishing services such as acoustic applications, false ceiling, and acoustic panel partition. The Department categorized these services as taxable under Commercial or Industrial Construction Service for the period June 2005 to March 2008. The adjudicating authority confirmed a demand of Rs. 44,34,115 along with interest and imposed a penalty under section 78 of the Finance Act, 1994. The Commissioner (Appeals) upheld this decision in the impugned order dated 22.12.2009, leading to the appeal.

2. Applicability of Service Tax Prior to 1.6.2007:
The appellant argued that based on a Supreme Court judgment in the case of Commissioner of Central Excise, Kerala Vs. Larsen & Toubro Ltd., they were not liable to pay service tax before 1.6.2007. For the period from 1.6.2007 to 31.3.2008, they claimed to have discharged the tax liability under the Commercial or Industrial Construction Service with a 67% abatement. They contended that as the services provided were works contract, they should benefit from the composition scheme. The appellant had already paid Rs. 1,91,426 for the period June 2007 to March 2008, exceeding the amount required under the composition scheme, but they did not seek a refund of the excess amount paid.

3. Eligibility for Composition Scheme and Discharge of Tax Liability:
Considering the services as works contract service, the appellants were deemed eligible for the composition scheme. The appellants had already paid more than double the amount required under the composition scheme for the period from 1.6.2007 to 31.3.2008. They expressed no intention to claim a refund of the excess amount paid. Consequently, the tax liability, after applying the composition scheme, had been fulfilled by the appellant, and no further liability was deemed necessary.

4. Imposition of Penalty:
The Tribunal acknowledged that the entire issue surrounding the tax liability was complex and required clarification from the Apex Court. Given the circumstances, the Tribunal found no justification for imposing a penalty under section 78 of the Finance Act, 1994, and thus set aside the penalty.

5. Conclusion:
In conclusion, the Tribunal ruled that the appellants were not liable to pay service tax before 1.6.2007 and had fulfilled their tax liability under the composition scheme for the period from 1.6.2007 to 31.3.2008. As a result, there was no additional tax liability beyond what had already been paid. The penalty under section 78 was also revoked due to the complexity of the issue. The appeal was partly allowed based on the above findings.

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