2018 (11) TMI 1224 - AT - Service Tax

Tribunal rules in favor of appellant on service tax classification and Works Contract Composition Scheme

The Tribunal ruled in favor of the appellant in a case concerning the classification of services under the Finance Act, 1944, eligibility for the Works ... Classification of services - works contract service or not - construction of Ore Handling Plant (OHP) and Coal Handing Plant (CHP) at Bhilai Steel Plant as sub-contractor of M/s. Heavy Engineering Corporation (HEC), Ranchi under Composition Scheme - Held that:- The issue regarding classification of service is settled in favour of the appellant vide this Tribunal order in case of appellant themselves pertaining to earlier period M/S S.K. SAMANTA & CO. (P) LTD. VERSUS COMMR. OF SERVICE TAX, KOLKATA (VICE-VERSA) [2018 (7) TMI 1669 - CESTAT KOLKATA], wherein it has been held that the activities undertaken by the appellant falls within the works contract service and liable to the benefit of Works Contract Act subsequent to 01.06.2007 in view of the decision of the Hon’ble Supreme Court in case of Commr. Of Central Excise & Customs, Kerala vs. Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT]. Extended period of Limitation - Held that:- It is on record that for the previous period department had been issuing the show cause notice which was subject matter of appeal before this Tribunal - the appeal is rightly covered under the Works Contract Service as they have provided services alongwith supply of materials, even though in a small proportion - the department is precluded from invoking the extended period for raising of the demand - entire demand is time barred. Appeal allowed - decided in favor of appellant. Issues:Classification of services under various provisions of Finance Act, 1944, eligibility for Works Contract Composition Scheme, alleged misclassification of services, tax liability, benefit of exemption under Notification No.1/2006-ST, artificial bifurcation of contracts, limitation period for demand, settled interpretation of works contract service, invocation of extended period for demand.Classification of Services:The appellant provided taxable services classified under various sections of the Finance Act, 1944. The Department alleged that the appellant misclassified their services to avail a concessional rate of service tax, resulting in a shortfall of payment. The Department contended that the appellant did not include the value of goods supplied in the taxable value as required by the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007. The appellant argued that the services rendered fell under the works contract service, citing a previous Tribunal order in their favor.Eligibility for Works Contract Composition Scheme:The appellant claimed eligibility for the Works Contract Composition Scheme, stating that they complied with the necessary requirements and correctly paid the service tax under the contracts. They argued that the alleged artificial bifurcation of contracts to reduce tax liability was baseless, as the terms and conditions of the contracts were set by the contractees, not the appellant.Misclassification of Services and Tax Liability:The Department alleged that the appellant artificially separated supply contracts from works and services contracts to reduce tax liability. The appellant refuted this claim, stating that the terms and conditions of the contracts were predetermined and beyond their control. They argued that the demand was time-barred and referred to legal precedents to support their position.Benefit of Exemption and Settlement of Interpretation:The appellant contended that they were entitled to the benefit of the Works Contract Composition Scheme and had correctly paid the service tax. They referenced legal decisions to support their argument and highlighted settled interpretations of works contract services post a Supreme Court decision. The Tribunal found in favor of the appellant, citing previous orders and legal precedents.Invocation of Extended Period for Demand and Limitation Period:The Tribunal noted that the demand was raised using the extended period, which was challenged by the appellant. Referring to legal precedents, the Tribunal concluded that the demand was time-barred, precluding the Department from invoking the extended period. The Tribunal set aside the impugned order, ruling in favor of the appellant on both counts and allowing the appeal with consequential benefit.