2019 (7) TMI 827 - AT - Service Tax

Service tax demand on construction projects by M/s UEM India Limited for 2005-2011 set aside.

The Tribunal set aside the service tax demand on construction projects by M/s UEM India Limited for the period 2005-2006 to 2010-2011, amounting to Rs. ... Commercial or industrial construction service (CICS) - construction of Sewage Treatment Plant (STP), Effluent Treatment Plant (ETP) and laying down of sewage pipelines for various customers including government bodies - HELD THAT:- Most of these are not for the commercial or industrial activities and, therefore, the same is not liable for service tax under the Finance Act. The appellant has submitted certificate from agencies involved in execution of these projects such as, Delhi Jal Board, Akashardham, Haryana Urban Development Authority, Hyderabad Urban Development Authority, U.P. Jal Nigam Board. These organisations are generally engaged in providing public services which are not in the nature of services for commerce or industry, of course, in some of the project there may be some element of commercial or industrial services as well. Further, a perusal of contract, which is also not disputed by the Revenue indicates that these are in the nature of ‘composite work contract’ which included supply of material along with the services. This issue has been decided by Hon’ble Supreme Court in case of COMMISSIONER, CENTRAL EXCISE & CUSTOMS VERSUS M/S LARSEN & TOUBRO LTD. AND OTHERS [2015 (8) TMI 749 - SUPREME COURT] judgement wherein it is held that the ‘composite work contract’ is not chargeable to service tax prior to 1.6.2007. It has also been held that if demand is not raised under the category of ‘work contract service’ for the period after 1.6.2007 the demand under any other services will not be sustainable. Appeal allowed - decided in favor of appellant. Issues involved:1. Confirmation of demand of service tax on construction of Sewage Treatment Plant (STP), Effluent Treatment Plant (ETP), and laying down of sewage pipelines for various customers under the category of commercial or industrial construction service (CICS).Detailed analysis:The appellant, M/s UEM India Limited, filed an appeal against the Order-in-Original demanding service tax amounting to Rs. 4,29,65,586 for the period 2005-2006 to 2010-2011. The primary issue was the confirmation of demand of service tax on construction projects for government bodies and private entities. The appellant argued that they are not liable to pay service tax under CICS as they did not render services for commercial or industrial purposes. They claimed that the contracts were composite contracts and therefore not taxable before June 1, 2007, citing relevant legal provisions and circulars. The appellant also mentioned various tribunal decisions supporting their argument and claimed eligibility for a specific notification benefit.The Department contended that the demand was valid except for services provided to U.P. Jal Nigam, which was deemed non-taxable. The Tribunal analyzed the contracts and found that most projects were not for commercial or industrial activities, making them non-taxable under the Finance Act. They referenced a Supreme Court judgment stating that composite work contracts were not taxable before June 1, 2007. The Tribunal also highlighted that post-June 1, 2007, the demand under any other service category would not be sustainable if not raised under the 'work contract service' category. They referred to various tribunal decisions supporting this interpretation and reiterated the distinction between 'works contract service' and 'commercial or industrial construction service.'The Tribunal ultimately set aside the impugned order, allowing the appeal and providing consequential benefits. The decision was based on the analysis that the appellant's activities did not fall under the category of commercial or industrial construction service, and the contracts were considered composite work contracts, not liable for service tax before June 1, 2007, as per relevant legal interpretations and precedents cited in the judgment.