2020 (7) TMI 28 - AT - Service Tax

Tribunal annuls service tax demand, citing incorrect classification and time-barred claim.

The Tribunal allowed the appellant's appeal, annulling the demand for service tax, education cess, and penalties. The Tribunal set aside the ... Industrial Construction Service - Works Contract Services - benefit of abatement - N/N. 15/2004-ST dt. 10/09/2004, No.18/2005-ST dt. 07/06/2005 and No.1/2006-ST dt. 01/03/2006 - Commercial or Industrial Construction Service - Works Contract Services - benefit of abatement was sought to be denied on the ground that the appellant had not included the value of material supplied free of cost by the service recipient - HELD THAT:- This issue is no longer res integra in the light of the Larger Bench decision of the Tribunal in the case of COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. [2018 (2) TMI 1325 - SUPREME COURT] wherein it has been held that while claiming abatement of 67% under these services, the value of material supplied by the customers need not be included. This decision of the Larger Bench has been upheld by the Apex Court reported in 2018(10) GSTL 118(SC). Further we find that from 01/06/2007, a new taxable service viz WCS was introduced under Section 65(105)(zzzza) of the Finance Act, 1994. There was considerable litigation on the issue whether service tax can be levied on individual WCS prior to its introduction from 01/06/2007 and the same was finally settled by the Hon’ble Apex Court in the case of COMMISSIONER, CENTRAL EXCISE & CUSTOMS VERSUS M/S LARSEN & TOUBRO LTD. AND OTHERS [2015 (8) TMI 749 - SUPREME COURT]. In this case, the Apex Court laid down the law on various aspects of levy of service tax on WCS. The Apex court has held that since as per Section 67, service tax is leviable on “gross amount charged”. The levy of service tax on CICS/CCS would be applicable only in case of pure service contracts whereas composite contracts involving transfer of property in goods would be liable to service tax only under WCS from 01/06/2007 as statutory mechanism to arrive at the value of service has been prescribed only under WCS from 01/06/2007. The Apex Court held that since the Finance Act had not laid down any charge or machinery to levy and assess service tax on individual WCS prior to 01/06/2006, hence the levy on such composite WCS prior to that date has no constitutional validity. Demand raised for the reason that the appellant did not intimate the Department about their intention to opt for payment of service tax under composition scheme under WCS - HELD THAT:- The Tribunal in VAISHNO ASSOCIATES VERSUS C.C.E. & S.T. -JAIPUR [2018 (3) TMI 417 - CESTAT NEW DELHI] had occasion to consider this issue and held that for sole reason of not filing the intimation opting to pay service tax under WCS, the demand cannot sustain. Time Limitation - Revenue has invoked extended period of limitation alleging suppression by the appellant - HELD THAT:- The appellants have been paying service tax under CICS and CCS by claiming abatement though no service tax was held to be payable. Further the levy of service tax on construction related activities has undergone several changes which led to lot of litigation during the relevant period and even the CBIC has recognized such confusions in various circulars issued by them. In such circumstances, there are no justification for invoking the extended period of limitation and the demand for the period from December 2005 to March 2009 is set aside being barred by limitation. Appeal allowed - decided in favor of appellant. Issues Involved:1. Denial of benefits under specific notifications.2. Classification of services provided by the assessee.3. Confirmation of service tax, education cess, and higher & secondary education cess.4. Payment of interest on the confirmed amount.5. Imposition of penalties under various sections of the Finance Act, 1994.6. Invocation of the extended period of limitation.Detailed Analysis:1. Denial of Benefits under Specific Notifications:The Commissioner denied the benefits under Notifications No. 15/2004-ST, 18/2005-ST, and 1/2006-ST for the period from 01/12/2005 to 31/03/2009. The appellant argued that the denial was based on the incorrect assumption that the value of materials supplied by customers should be included in the gross amount charged. The Tribunal referenced the Larger Bench decision in Bhayana Builders Pvt. Ltd. and the Supreme Court's affirmation, which clarified that the value of materials supplied by customers need not be included for claiming abatement.2. Classification of Services Provided by the Assessee:The Commissioner classified the services under 'Construction of Complex Service (Residential)' or 'Commercial or Industrial Construction Service' and rejected the classification under 'Works Contract Service' (WCS). The appellant contended that composite contracts involving transfer of property in goods should be classified under WCS post 01/06/2007, as per the Supreme Court's decision in CST Vs. L&T Ltd. The Tribunal agreed, stating that composite contracts should be classified under WCS from 01/06/2007 and not under CICS/CCS.3. Confirmation of Service Tax, Education Cess, and Higher & Secondary Education Cess:The Commissioner confirmed an amount of Rs. 12,49,16,628/- for the period 01/12/2005 to 31/03/2009 and Rs. 3,64,49,664/- for the period 01/04/2009 to 31/03/2010. The Tribunal found that the demand was based on incorrect classification and denial of abatement, which was not sustainable in light of the Supreme Court's decision and various Tribunal rulings.4. Payment of Interest on the Confirmed Amount:The Commissioner ordered the payment of interest on the confirmed amounts under Section 75 of the Finance Act, 1994. However, since the Tribunal set aside the demand, the order for payment of interest was also set aside.5. Imposition of Penalties under Various Sections of the Finance Act, 1994:The Commissioner imposed penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The Tribunal, referencing the Supreme Court's decision and other Tribunal rulings, found that the penalties were not justified due to the incorrect classification and denial of abatement. The penalties were thus set aside.6. Invocation of Extended Period of Limitation:The demand for the period from December 2005 to March 2009 was raised by a show-cause notice on 22/07/2010, invoking the extended period of limitation due to alleged suppression by the appellant. The Tribunal noted that the appellant had been regularly filing returns and paying service tax under CICS/CCS, and the confusion regarding the levy of service tax on construction activities was recognized by CBIC in various circulars. Therefore, the invocation of the extended period was not justified, and the demand was set aside as time-barred.Conclusion:The Tribunal set aside the impugned order, allowing the appellant's appeal. The demand for service tax, education cess, and higher & secondary education cess, along with the interest and penalties, were all annulled. The Tribunal's decision was based on the Supreme Court's ruling in CST Vs. L&T Ltd., which clarified the classification and levy of service tax on composite contracts involving transfer of property in goods.