2019 (5) TMI 1414 - AT - Service Tax

Tribunal rules construction activity pre-2007 non-taxable

Shri Umesh Saxena Versus Commissioner of Customs, Central Excise & Service Tax, Bhopal

The Tribunal classified the construction activity as 'Works Contract Service,' finding it non-taxable before 01.06.2007. Consequently, the service tax ... Classification of services - Works contract service or Construction of commercial or industrial complex? - entire activity of construction took place during the financial year 2005-2006 - non-payment of service tax liability - demand of interest and penalty - HELD THAT:- On perusal of the concerned work order, we find that it involved both the supply of goods and material as well as element of service and labour. It is also a matter of record that the work order was awarded to the appellant on 21.6.2005 and same was to be completed within a period of four months. Thus, it is very clear that the activity undertaken by the appellant was prior to 01.06.2007 when the ‘Works Contract service’ came to be enacted by the Finance Act, 1994. So far as the classification of work under ‘Composite Work Contract’ is concerned, the matter is no longer res integra as it has been already decided by the Hon’ble Supreme Court in the case of COMMISSIONER, CENTRAL EXCISE & CUSTOMS VERSUS M/S LARSEN & TOUBRO LTD. AND OTHERS [2015 (8) TMI 749 - SUPREME COURT] where it has been laid down that in case any contract involve both transfer of property and goods along with element of service and labour, same will qualify to be classified as ‘Works Contract service’ and since ‘Work Contract service’ have came in existence from 01.06.2007 and the construction activity undertaken by the appellant was prior to 01.06.2007. The activity of the appellant qualifies to be classified as ‘Works Contract Service’ and since the ‘Works Contract service’ was not taxable prior to 01.06.2007, we do not find any merit in confirming the service tax demand against the appellant. Appeal allowed - decided in favor of appellant. Issues:1. Tax liability on construction activity for a petty contractor.2. Applicability of service tax on construction of platform in a sabzi mandi.3. Classification of construction activity as commercial or industrial.4. Interpretation of 'Commercial or Industrial Construction service'.5. Applicability of Works Contract Service.6. Tax liability timeline before and after 01.06.2007.Analysis:1. The appellant, a petty contractor, undertook construction work for various Government agencies during 2005-2007. The issue arose when the department alleged non-payment of service tax amounting to Rs. 4,31,000 for constructing a platform in a sabzi mandi. A show cause notice was issued, and subsequent orders confirmed the tax liability. The appellant contested that the construction was not for commercial or industrial purposes but for public utility, hence not liable for service tax.2. The appellant argued that the construction in the sabzi mandi was not commercial or industrial but for public utility. They contended that the definition of 'Commercial or Industrial construction service' necessitates the construction to be for commercial or industrial purposes. The platform was constructed for public utility, devoid of commercial elements, making the service tax provisions inapplicable.3. The appellant challenged the order-in-original, asserting that the construction activity was awarded before 01.06.2007 and involved both goods/material supply and labor services. They claimed the activity fell under 'Works Contract Service,' enacted post 01.06.2007, citing a Supreme Court decision. The appellant argued that no service tax was leviable for their activity, making the order legally unsustainable.4. The Tribunal noted that the construction work was awarded before 01.06.2007, when 'Works Contract service' was introduced. Referring to the Supreme Court decision, the Tribunal classified the activity as 'Works Contract Service,' which was not taxable pre-01.06.2007. Consequently, the Tribunal found no merit in confirming the service tax demand, leading to the allowance of the appeal and setting aside of the Order-in-Appeal.5. In conclusion, the Tribunal held that the construction activity undertaken by the appellant qualified as 'Works Contract Service' and was not taxable before 01.06.2007. The impugned Order-in-Appeal was deemed devoid of merit, resulting in its setting aside and allowing the appeal of the appellant.