2021 (3) TMI 519 - AT - Service Tax

Tribunal Upholds Service Tax on Tangible Goods, Sets Aside Penalties and Other Service Tax Demands.

The Tribunal set aside the demands for service tax under 'Commercial and Industrial Construction Service' and 'Cargo Handling Service.' However, it upheld ... Recovery of Differential Service Tax - cargo handling service - supply of river sand - transportation of limestone from mines - commercial and industrial construction service - Revenue is of the view that proper amount of service tax not paid by assessee in respect of disputed service. Commercial and Industrial Construction Service - demand made on an activity which admittedly involved both supply of goods and rendering services - HELD THAT:- It has now been well settled by the Hon’ble Supreme Court in the case of Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT] that “works contract service” is separate specie of contract known to commerce and it cannot be equated either with a contract for sale of goods or a contract for supply of services simplicitor. Service tax can only be demanded on Works Contract services after the introduction of a charge on works contract service and not under any other head either before the introduction of the service or thereafter - Even if they had not fulfilled the conditions, there is no case for the Department to charge service tax on this service under any other head - the demand of service tax under the head of Commercial and Industrial Construction Service needs to be set aside. Cargo handling service - supply of river sand - HELD THAT:- The first contract is supply of river sand; it is not for loading or unloading any cargo. Needless to say that if somebody has to supply river sand it has to loaded into the truck and unloaded it at the customer’s destination. The nature of the contract remains to be one of supply of river sand and it cannot change into a contract for some other service. Cargo handling service - transportation of limestone from mines - HELD THAT:- The contract is evidently for transportation of goods and the appellant has been discharging service tax under Goods Transport Agency service. Merely because transportation also requires the appellant to load and unload goods, it cannot be said that the appellant has performed cargo handling service - This view with respect to the demand for an earlier period for these services was already taken by this Bench in M/S SHREE MOHANGARH CONSTRUCTION CO. JAISALMER VERSUS COMMISSIONER OF CENTRAL EXCISE JAIPUR II [2019 (3) TMI 112 - CESTAT NEW DELHI] where it was held that The purchase order clearly shows that the contract was for supply of material and can by no stretch of imagination, be considered as for providing Cargo Handling Service and no service tax is payable for this activity under the category of Cargo Handling Service - thus the demand is set aside. Supply of tangible goods service - HELD THAT:- The appellant is not contesting this amount and it needs to be upheld. Interest, if any, payable under Section 75 of the Finance Act, 1994 also needs to be paid on this amount. As bulk of the demands have already been set aside, invoking the powers under Section 80, the penalty imposed under Section 76 is set aside. Appeal allowed in part. Issues Involved:1. Demand of service tax under 'Commercial and Industrial Construction Service'.2. Demand of service tax under 'Cargo Handling Service'.3. Demand of service tax under 'Supply of Tangible Goods Service'.4. Imposition of penalties under Section 76 and 77 of the Finance Act, 1994.Issue-wise Detailed Analysis:1. Demand of Service Tax under 'Commercial and Industrial Construction Service':The appellant was engaged in providing services that involved both supply of goods and rendering of services. The Department raised a demand under 'Commercial and Industrial Construction Service' (CICS) for the period 01/04/2012 to 31/03/2013, amounting to Rs. 3,11,604/-. The appellant contended that the services provided were actually 'works contract services' and cited the Supreme Court judgment in the case of Commissioner of Central Excise and Customs, Kerala versus Larsen & Toubro Limited (2015), which established that works contract services cannot be charged under any other head. The Commissioner rejected this contention, stating that the appellant did not fulfill the conditions under the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. However, the Tribunal concluded that even if the conditions were not fulfilled, service tax could not be charged under any other head. Therefore, the demand under CICS was set aside.2. Demand of Service Tax under 'Cargo Handling Service':The demand under cargo handling service was based on two activities:(i) Supply of raw material like river sand and crusher grit to M/s Enercom India Ltd.(ii) Transportation of 40mm size limestone from RSMM's Sanu Mines to M/s GLPL, Barmer.The Tribunal noted that the nature of the contracts was for supply and transportation, not for cargo handling. The earlier order No. 50287 of 2019 had already set aside similar demands, noting that the supply of materials and transportation activities could not be considered as cargo handling services. Consequently, the Tribunal found no reason to deviate from this view and set aside the demand under cargo handling service.3. Demand of Service Tax under 'Supply of Tangible Goods Service':The appellant did not contest the demand under 'Supply of Tangible Goods Service' for their JCB and tractor supplied to M/s Enercom India Ltd. project, amounting to Rs. 5,58,614/-. The Tribunal upheld this demand along with applicable interest under Section 75 of the Finance Act, 1994.4. Imposition of Penalties under Section 76 and 77 of the Finance Act, 1994:Given that the bulk of the demands were set aside, the Tribunal invoked the powers under Section 80 and set aside the penalty imposed under Section 76. The Tribunal concluded that the impugned order is upheld only to the extent of the demand in service tax on supply of tangible goods service amounting to Rs. 5,58,614/- along with interest. The remaining part of the impugned order was set aside.Conclusion:The appeal was disposed of with the Tribunal setting aside the demands under 'Commercial and Industrial Construction Service' and 'Cargo Handling Service', while upholding the demand under 'Supply of Tangible Goods Service' along with interest. The penalty under Section 76 was also set aside. The order was pronounced in open court on 12/03/2021.