2019 (2) TMI 1494 - AT - Service Tax

Tribunal ruling on Service Tax demands for construction work: Partially upheld, penalties modified, interest upheld.

The Tribunal upheld the demand for Service Tax related to construction work for a specific client but set aside demands for services provided to ... Works contract - construction services - services provided to government projects either directly or as sub contractor - Demand of Service tax - Held that:- The Tribunal in the case of KHURANA ENGINEERING LTD. VERSUS COMMR. OF C. EX., AHMEDABAD [2010 (11) TMI 81 - CESTAT, AHMEDABAD], has held that works done by M/s. Nobletech Engineering (P) Ltd. to M/s. Kerala Water Authority and to M/s. Degremount Ltd. falling under the category of Commercial and Industrial Construction Service and Works Contracts Service are exempted from payment of Service Tax - demand cannot be upheld. Works contract - Services under the category of work contract services provided to M/s P K Thomas (Muscat Towers), Mr G Yohannan (Nandan Square) - Held that:- There is no dispute that the said services were provided during the period 2004-05 to 2006-07, i.e. prior to 01.03.2007 - Hon’ble Apex Court has in case of Larsen and Tubro [2015 (8) TMI 749 - SUPREME COURT] has held that said services became taxable from 1st June 2007 - demand cannot survive. Penalties - Held that:- For the demands upheld the contraventions of provisions of the Finance Act, 1994 leading to imposition of penalty under Section 76, 77 & 78 needs to be upheld - In case of benefit of payment of penalty and the rate of 25% was available to the appellant at the time when they had paid the Service Tax along with interest, the same benefit will continue in the present scenario - Penalties under Section 76 & 77 which relates to procedural contravention need to be upheld. Demand of interest - Held that:- For the service tax short paid, the demand for interest is upheld - For the re-quantification of the demand interest under Section 75 and penalties under Section 76, 77 & 78, the matter remanded back to adjudicating authority. Appeal disposed off. Issues:1. Dispute over the demand for Service Tax, Education Cess, and Secondary and Higher Education Cess.2. Applicability of interest and penalties under various sections of the Finance Act, 1994.3. Services provided by the appellant to government projects and commercial entities.4. Dispute regarding the taxable period for certain services provided.5. Challenge against penalties imposed under different sections of the Finance Act, 1994.Analysis:1. The appeal challenged an Order-in-Original demanding Service Tax, Education Cess, and Secondary and Higher Education Cess. The Commissioner confirmed the demand and imposed penalties under Sections 76, 77, and 78 of the Finance Act, 1994, along with interest. The appellant provided various services, including construction work and site formation, leading to the disputed tax liabilities.2. The appellant contested the demand based on the nature and timing of services provided. The Tribunal upheld the demand for Service Tax related to construction of Cement Silo for a specific client as the appellant did not dispute this liability. However, demands related to services provided to government projects were set aside based on precedents and decisions exempting such services from taxation.3. Regarding services provided to commercial entities, the Tribunal considered the taxable period for certain services and cited a Supreme Court decision to quash demands for services provided before they became taxable. The Tribunal upheld the demand for Service Tax on the construction of Cement Silo for a specific client but dropped demands for other services provided to commercial entities based on the timing and taxability of the services.4. The Tribunal modified penalties imposed under Section 78 proportionally based on the upheld demands. Penalties under Sections 76 and 77 were upheld for procedural contraventions. The Tribunal also upheld the demand for interest on Service Tax short-paid and remanded the matter for re-quantification of the demand, interest, and penalties by the adjudicating authority.5. The appeal was disposed of with directions for the re-quantification of the tax payable, interest, and penalties within a specified timeline. The Tribunal's decision aimed to provide a comprehensive resolution to the disputed tax liabilities, considering the nature of services provided and the applicable legal provisions.