2018 (5) TMI 1422 - AT - Service Tax

Tribunal rules in favor of appellant on service tax classification dispute

The Tribunal ruled in favor of the appellant in the case concerning the classification of services provided to M/s Hindustan Petroleum Corporation. The ... Classification as Works Contract Service - Erection, Commissioning or Installation Service - Liability for Service Tax prior to 01/06/2007 - Entitlement to abatement under Works Contract ServiceClassification as Works Contract Service - Erection, Commissioning or Installation Service - Activity carried out for M/s HPCL is classifiable as Works Contract Service - HELD THAT: - The Tribunal examined the nature of the appellant's activities for M/s HPCL (civil construction, site preparation, road work, pump installation and related works) and, following the ratio of the Hon'ble Supreme Court decision in Larsen & Toubro Ltd. and the Tribunal decision in M/s Sunrise V/s Commissioner, Jaipur-I , held that the activity falls within the definition of 'Works Contract Service' rather than 'Erection, Commissioning or Installation Service'. The Tribunal therefore reclassified the service under WCS. [Paras 6, 7]Service is classified under Works Contract ServiceLiability for Service Tax prior to 01/06/2007 - Classification as Works Contract Service - Demand of Service Tax for the period prior to 01/06/2007 set aside - HELD THAT: - Applying the categorical holding in Larsen & Toubro Ltd. that activities falling under Works Contract Service were not liable to service tax before 01/06/2007, the Tribunal set aside the demand for the period up to 31.05.2007. The appellant's activities being held to be WCS brings them within that principle and relieves them of liability for the pre-01/06/2007 period. [Paras 7, 9]Demand up to 31.05.2007 is set asideEntitlement to abatement under Works Contract Service - Liability for Service Tax post 01/06/2007 - Appellant entitled to abatement available to Works Contract Service for the period from 01/06/2007; differential demand by denying abatement is unjustified - HELD THAT: - For the period w.e.f. 01/06/2007 the Tribunal held the activity taxable as WCS. It was recorded that the appellant had paid service tax under WCS for 2007-08 and 2008-09, and the Revenue's attempt to demand differential tax by denying the abatement available to WCS was found to be without justification. Consequently the appellant is entitled to the abatement applicable to Works Contract Service and the demand for differential service tax is unsustainable. [Paras 8, 9]Appellant entitled to abatement under WCS; differential demand by denying abatement set asideFinal Conclusion: The appeal is allowed: the services are held to be Works Contract Services; demand prior to 01/06/2007 (upto 31.05.2007) is set aside; the appellant is entitled to the abatement applicable to Works Contract Service for the period thereafter and the differential demand raised by denying such abatement is quashed. Issues:Classification of service under Works Contract Service, Demand of Service Tax for the period prior to 01/06/2007, Denial of abatement under Works Contract Service for the period w.e.f. 01/06/2007.Analysis:The appeal was filed against the Order-in-Appeal No. 182/2012 dated 05/09/2012 concerning the classification of services provided by the appellant for M/s Hindustan Petroleum Corporation. The Department proposed a demand for Service Tax under the category of 'Erection, Commissioning or Installation Service.' The appellant contended that the activity falls under Works Contract Services, citing the decision of the Hon'ble Supreme Court in the case of Larsen & Toubro Ltd. The appellant argued that for the period prior to 01/06/2007, the service would not be liable to Service Tax under Works Contract Service and that for the period after 01/06/2007, the Department demanded Service Tax without allowing the benefit of abatement available under Works Contract Service.During the hearing, the Department justified the order but acknowledged that the service should be classified under Works Contract Service based on the Supreme Court's decision. However, it highlighted the appellant's failure to register until 2009 and the Department's lack of awareness of the services provided to M/s HPCL. The Tribunal noted that the appellant had performed various activities for M/s HPCL, including civil construction, site preparation, and pump installation. The demand covered the period from 2004-05 to Feb 2010, with the proposed classification under 'Erection, Commissioning or Installation Service.'The Tribunal referred to the Supreme Court's decision in Larsen & Toubro, stating that Works Contract Service is a distinct category not liable to Service Tax before 01/06/2007. Following the decision in a similar case, the Tribunal concluded that the activity in question falls under Works Contract Service. The demand for Service Tax for the period before 01/06/2007 was set aside. However, for the period from 01/06/2007, the activity was deemed liable to Service Tax under Works Contract Service, and the appellant was entitled to the abatement available under this category. The Tribunal set aside the impugned order and allowed the appeal, pronouncing the decision on 23/05/2018.