Contracts deemed works contracts pre-2007, service tax recalculated post-2007. Appellant partially wins.

The Tribunal held that the contracts were works contracts and not subject to service tax before 01.06.2007. The appellant's liability for service tax from 01.06.2007 to 30.09.2007 required recalculating. The appeal by the appellant was partially allowed with consequential relief, while the Revenue's appeal was dismissed.

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Issues Involved:
1. Leviability of service tax on services rendered under EPC contracts.
2. Classification of contracts as works contracts.
3. Applicability of Notifications No. 19/2003-ST and No. 1/2006-ST.
4. Entitlement to abatement under Notification No. 12/2003-ST.
5. Applicability of penalties under Sections 76 and 78 of the Finance Act, 1994.
6. Bar of limitation on the demand.

Issue-wise Detailed Analysis:

1. Leviability of Service Tax on Services Rendered under EPC Contracts:
The primary issue was whether the services provided by the appellant under EPC contracts were liable to service tax. The appellant argued that their contracts, divided into supply and service components, constituted works contracts and should be taxed accordingly. The Tribunal referenced the Supreme Court's judgment in Larsen & Toubro Ltd., which held that service tax on works contracts is applicable only post-01.06.2007. Consequently, the Tribunal concluded that service tax was not leviable on the appellant prior to 01.06.2007, thus limiting the demand to the period from 01.06.2007 to 30.09.2007.

2. Classification of Contracts as Works Contracts:
The appellant contended that their contracts, although split into two agreements, were essentially works contracts. The Tribunal agreed, noting that both agreements were interdependent and contained a cross-fall breach clause, making them part of a single works contract. This classification was crucial as it determined the applicability of service tax only from 01.06.2007 onwards, aligning with the Supreme Court's ruling in Larsen & Toubro Ltd.

3. Applicability of Notifications No. 19/2003-ST and No. 1/2006-ST:
The appellant claimed benefits under these notifications for the abatement of service tax. The Tribunal found that the appellant had correctly availed these benefits for the period from 01.04.2006 to 30.09.2007. The Tribunal emphasized that the supply of materials, evidenced by VAT payments, justified the abatement claims under these notifications.

4. Entitlement to Abatement under Notification No. 12/2003-ST:
The Tribunal examined whether the appellant was entitled to abatement under Notification No. 12/2003-ST, which exempts the value of goods sold during the provision of services from service tax. The Tribunal concluded that the appellant met the conditions of the notification, as there was documentary proof of the sale of materials, and VAT was paid on these materials. Thus, the appellant was entitled to the abatement.

5. Applicability of Penalties under Sections 76 and 78 of the Finance Act, 1994:
The Revenue appealed against the non-imposition of penalties under Section 76. The Tribunal referenced the Kerala High Court's decision in Krishna Poduval, which stated that penalties under Sections 76 and 78 are independent. However, given the Tribunal's decision to classify the contracts as works contracts and limit the tax liability to post-01.06.2007, the Tribunal found the Revenue's appeal on penalties unsustainable.

6. Bar of Limitation on the Demand:
The appellant argued that the demand was barred by limitation, as all relevant facts were within the department's knowledge. The Tribunal did not explicitly address this issue in detail but implicitly accepted the appellant's argument by limiting the demand to the period post-01.06.2007.

Conclusion:
The Tribunal held that the contracts were works contracts and not chargeable to service tax prior to 01.06.2007. For the period from 01.06.2007 to 30.09.2007, the appellant's service tax liability under the Erection, Commissioning, and Installation Service needed to be recomputed. The appellant's appeal was partially allowed with consequential relief, and the Revenue's appeal was dismissed.

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