2018 (4) TMI 913 - AT - Service Tax

Tribunal rules in favor of Appellant on service tax classification dispute

M/s. ST Electricals Pvt. Ltd. Versus Commissioner of Central Excise, Pune-I

M/s. ST Electricals Pvt. Ltd. Versus Commissioner of Central Excise, Pune-I - 2019 (20) G. S. T. L. 273 (Tri. - Mumbai) Issues Involved:1. Classification of services under 'Erection, Commissioning and Installation' vs. 'Works Contract'.2. Applicability of service tax prior to and post 01.06.2007.3. Adjudicating authority's compliance with Tribunal's remand order.4. Scope of show cause notice vs. confirmed demand.5. Applicability of extended period for demand and penalties under Section 73(1) of the Finance Act, 1994.Issue-wise Detailed Analysis:1. Classification of Services:The core issue was whether the services provided by the Appellant fell under 'Erection, Commissioning and Installation' or 'Works Contract'. The Appellant argued that their services were composite contracts involving supply of materials and services, thus falling under 'Works Contract' and not liable for service tax as per the Supreme Court's ruling in Commissioner Vs. Larsen & Toubro Ltd. The Tribunal found that the Appellant was indeed undertaking composite contracts and thus, the services should be classified under 'Works Contract' rather than 'Erection, Commissioning and Installation'.2. Applicability of Service Tax:For the period prior to 01.06.2007, the Tribunal held that no service tax could be demanded from the Appellant as per the Supreme Court's decision in the Larsen & Toubro case. For the period after 01.06.2007, the Appellant contended that their services were related to roads and thus excluded from 'Works Contract' service. The Tribunal agreed, stating that the services were in respect of roads and thus not chargeable to service tax post 01.06.2007, referencing the Pioneer Fabricators Pvt. Ltd. case.3. Compliance with Tribunal's Remand Order:The Tribunal noted that its earlier order had remanded the case keeping all issues open. The adjudicating authority was expected to reconsider all issues in light of relevant judgments. However, the Tribunal found that the adjudicating authority did not comply with this directive and incorrectly proceeded on the basis that service tax was payable on 'Erection, Commissioning and Installation'.4. Scope of Show Cause Notice vs. Confirmed Demand:The show cause notice issued to the Appellant demanded service tax under 'Erection, Commissioning and Installation'. However, the adjudicating authority confirmed the demand under 'Works Contract' for the period after 01.06.2007. The Tribunal held that this was beyond the scope of the show cause notice, referencing judgments in cases such as Commissioner Vs. Ballarpur Industries and CCE Vs. GAIL, thereby rendering the demand unsustainable.5. Applicability of Extended Period for Demand and Penalties:The Tribunal examined whether the extended period for demand under Section 73(1) of the Finance Act, 1994, was applicable. It found no evidence of suppression or malafide intention by the Appellant. The Appellant had surrendered their registration and informed the department of their non-liability for service tax. The Tribunal cited the Supreme Court's ruling in Continental Foundation Jt. Venture Vs. Commissioner, which clarified that mere omission to give correct information does not constitute suppression unless it is deliberate. Consequently, the Tribunal held that the demand was hit by the limitation of time and set aside the penalties.Conclusion:The Tribunal set aside the impugned order to the extent it upheld demands and imposition of penalties against the Appellant. The appeal was allowed on both merit and limitation grounds.