2018 (6) TMI 930 - AT - Service Tax

Tribunal sets aside liability of Rs. 1,48,28,716 due to misclassification of taxable services

The Tribunal set aside the liability amounting to Rs. 1,48,28,716 imposed on the appellant for providing taxable services, interest, and penalties under ... Classification of services - appellant contends that they had rendered ‘goods transport agency’ service for which the liability was limited and that the impugned order has wrongly classified the activity as ‘cargo handling service’ to extract the full tax from them - appellant further contends that the classification as ‘management, maintenance and repair service’ pertains to road upkeep under various contracts that should rightly fall under ‘works contract’ and that appropriate abatement should have been granted. Held that:- The adjudicating authority was deprived of the clarity afforded by the Hon’ble Supreme Court in Commissioner of Central excise & Customs, Kerala v. Larsen& Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT] here in deciding upon the taxability. The decision has clearly distinguished ‘works contract service’ and as inclusive supply of materials in contradistinction to the separate taxability of the various categories of this service during the earlier period as restricted to service simpliciter; any such contract that included supply of material was liable to tax only after the incorporation of ‘works contract service’ in section 65 of Finance Act, 1994. This is an aspect that requires scrutiny afresh. Appeal allowed by way of remand. Issues: Liability for providing taxable services, interest, penalties under sections 76, 77, and 78 of Finance Act, 1994. Misclassification of services: 'goods transport agency' as 'cargo handling service', 'cleaning activity' discharge, 'works contract service' abatement denial, 'management, maintenance and repair service' classification. Interpretation of 'works contract service' in light of Supreme Court decision.The judgment pertains to a challenge against the confirmation of liability amounting to Rs. 1,48,28,716 for providing taxable services, along with interest and penalties under sections 76, 77, and 78 of the Finance Act, 1994. The Commissioner found the appellant liable for failing to remit taxes on services rendered from 2005-06 to 2009-10. The appellant did not appear, but the Authorized Representative presented payment details and grounds of appeal. The services identified as taxable included 'management, maintenance and repair service', 'commercial or industrial construction service', 'cleaning activity service', 'cargo handling service', 'works contract service', and 'supply of tangible goods service'.Regarding the misclassification of services, the appellant argued that their service was 'goods transport agency', not 'cargo handling service', and that they had already discharged the liability for 'cleaning activity' under a different category. They also claimed that 'works contract service' abatement was not granted. The appellant contended that 'management, maintenance and repair service' should be classified under 'works contract' with appropriate abatement. The Tribunal noted the lack of clarity in the classification and the need for fresh scrutiny.The Tribunal observed that the adjudicating authority lacked the clarity provided by a Supreme Court decision in distinguishing 'works contract service' that includes material supply from services without material supply. The decision highlighted that service contracts with material supply were taxable only after the inclusion of 'works contract service' in the Finance Act. Due to the need for a fresh look at the contracts involving material supply, the Tribunal set aside the previous order and remitted the matter for fresh adjudication. The judgment was pronounced on 29.05.2018.