Tribunal: Service tax demands pre-2007 not valid. Post-2007, tax only on works contracts. Time-barred demand rejected.

The Tribunal held that the service tax demand prior to 1.6.2007 was not sustainable based on the Supreme Court's ruling on composite contracts. Regarding the service tax demand post 1.6.2007, the Tribunal determined that service tax should only be levied under works contract services for composite contracts. The Tribunal impliedly accepted the argument that the demand was time-barred. Consequently, the Tribunal set aside the service tax demands, allowing the appeal with consequential relief and emphasizing the applicability of service tax under works contract services for composite contracts.

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Issues Involved:
1. Whether the service tax demand prior to 1.6.2007 is sustainable.
2. Whether the service tax demand post 1.6.2007 should be under works contract services or under construction of residential/commercial complex services.
3. Whether the demand for service tax is time-barred.

Issue-wise Detailed Analysis:

1. Service Tax Demand Prior to 1.6.2007:
The Tribunal noted that the demand prior to 1.6.2007 cannot sustain as per the decision of the Hon’ble Supreme Court in the case of Commissioner Vs. Larsen & Toubro Ltd. – 2015 (39) STR 913 (SC). The Supreme Court held that there can be no levy of service tax on composite contracts (involving both service and supply of goods) prior to 1.6.2007. The Tribunal affirmed that the service tax demand for the period prior to 1.6.2007 is not sustainable and must be set aside.

2. Service Tax Demand Post 1.6.2007:
The Tribunal discussed that the appellants have discharged the service tax under works contract services under the composition scheme after 1.6.2007. The department contended that the appellants should discharge service tax under construction of residential complex service for Swarup Heritage and under commercial or industrial construction service for Jayanth Tech Park. However, the Tribunal referred to its decision in Real Value Promoters Pvt. Ltd. and Ors. Commissioner of GST and Central Excise, Chennai, which held that after 1.6.2007, in the case of composite contracts, the levy of service tax can only be under works contract service. The Tribunal concluded that the service tax liability under the category of ‘commercial or industrial construction service’ or ‘construction of complex service’ will continue to be attracted only if the activities are in the nature of services simpliciter. For activities involving indivisible composite contracts, such services will require to be exigible to service tax liabilities under ‘Works Contract Service’ as defined under section 65(105)(zzzza).

3. Time-Barred Demand:
The appellant argued that the demand for service tax in respect of both projects is wholly time-barred. The Tribunal did not explicitly address the time-barred issue in the detailed analysis, but the overall conclusion that the service tax demands cannot sustain implies that the time-barred argument was accepted implicitly.

Conclusion:
The Tribunal concluded that the demand of service tax cannot sustain. The impugned order was set aside, and the appeal was allowed with consequential relief, if any. The Tribunal emphasized that for composite works contracts, service tax cannot be demanded under commercial or industrial construction service or construction of complex service for the periods in dispute. The operative portion of the order was pronounced in open court.

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