2019 (6) TMI 208 - AT - Service Tax

Construction contractor wins appeal challenging service tax demand and penalties

The appeal challenged the confirmation of demand of service tax, interest, and penalties under two show-cause notices. The appellant, a construction ... Classification of services - Construction services or works contract services? - HELD THAT:- In the present case, the activities undertaken by the appellant involves the transfer of goods and thus falls in the definition of works contract which was made taxable from 01/06/2007 - this issue is no more res integra and has been settled by Apex Court in the case of COMMISSIONER, CENTRAL EXCISE & CUSTOMS VERSUS M/S LARSEN & TOUBRO LTD. AND OTHERS [2015 (8) TMI 749 - SUPREME COURT] - Further the entire period involved in the present case is prior to 01/06/2007. Therefore the decision of the Apex Court in the case of Larsen and Toubro Ltd. is squarely applicable in the present case. Service tax liability on a sub-contractor - HELD THAT:- Where the main contractor pays the service tax, we find that in the present case, the appellant in certain cases has acted as a sub-contractor to the main contractor and the main contractor has paid the service tax and in view of the various decisions, it is held that the sub-contractor is not liable to pay service tax where the main contractor had paid the service tax. Extended period of limitation - second SCN - HELD THAT:- For the subsequent show-cause notice, there cannot be any suppression of facts in view of the decision in the case of NIZAM SUGAR FACTORY VERSUS COLLECTOR OF CENTRAL EXCISE, AP [2006 (4) TMI 127 - SUPREME COURT] - extended period not invokable. Appeal allowed - decided in favor of appellant. Issues:- Confirmation of demand of service tax, interest, and penalties for two show-cause notices involving different periods.- Applicability of service tax on works contract services provided by the appellant.- Liability of sub-contractors for service tax when the main contractor has paid.- Computation of service tax including the value of free supply of material.- Invocation of the extended period of limitation for the subsequent show-cause notice.Analysis:Confirmation of Demand:The appeal challenged the confirmation of demand of service tax, interest, and penalties under two show-cause notices covering distinct periods. The appellant, a construction contractor, was found to have provided taxable services falling under 'commercial or industrial construction service' and 'construction of complex service.' The impugned order confirmed the liabilities after considering the submissions made by the appellant.Applicability of Service Tax on Works Contract Services:The appellant argued that their activities constituted works contract services and should not be subject to service tax as they involved the transfer of goods. Citing the case of CCE Vs. Larsen and Toubro Ltd., the appellant contended that service tax on works contracts could not be levied before 01/06/2007. The Tribunal agreed with this argument, holding that the activities in question fell under works contract services, making them exempt from service tax for the relevant period.Liability of Sub-Contractors:Regarding the liability of sub-contractors for service tax when the main contractor has paid, the Tribunal found that in cases where the main contractor had already paid the service tax, the sub-contractor was not liable to pay again. Relying on various legal precedents, the Tribunal concluded that the appellant, acting as a sub-contractor in certain instances, was not responsible for service tax where the main contractor had fulfilled this obligation.Computation of Service Tax:The appellant contested the computation of service tax, arguing that including the value of free material supply was incorrect. Referring to the decision in Bhayana Builders (P) Ltd. Vs. CST, Delhi, the appellant claimed that such inclusion was not legally permissible. The Tribunal agreed with this contention, finding the computation flawed and inconsistent with legal standards.Extended Period of Limitation:Lastly, the appellant challenged the invocation of the extended period of limitation for the subsequent show-cause notice. Citing the case of Nizam Sugar Factory Vs. CCE, AP, the appellant argued that the extended period had been wrongly applied. The Tribunal concurred, stating that there was no suppression of facts warranting the extension, in line with legal precedent.In conclusion, the Tribunal found the impugned order unsustainable based on the legal arguments presented by the appellant and the established legal principles. Consequently, the appeal was allowed, and the impugned order was set aside, granting relief to the appellant.