2022 (9) TMI 1004 - AT - Service Tax

Tribunal rules on service tax liability for composite works contracts, clarifying pre-2012 non-taxability.

The Commissioner, Service Tax Commissionerate, New Delhi Versus M/s Shaka Electricals

The Commissioner, Service Tax Commissionerate, New Delhi Versus M/s Shaka Electricals - TMI Issues:Appeal against dropping proceedings in a service tax case based on classification of services under ECIS or works contract service.Analysis:The appeal was filed by the Revenue challenging the dropping of proceedings against the respondent based on the order-in-original issued by the Principal Commissioner of Service Tax. The respondent, registered for ECIS, was providing services prior to registration that were deemed classifiable under ECIS. The respondent argued that the services provided were composite work contracts involving both goods supply and services, thus not liable for service tax under ECIS.The Commissioner, relying on the Supreme Court judgment in Gannon Dunkerley & Co. case, held that composite works contracts are a distinct category not subject to service tax under any other category. The Revenue raised several grounds in their appeal, including the timing of the respondent's claim, lack of clarification sought from the Department, and the specific classification of ECIS over works contract services.The Tribunal considered the submissions and found that the contracts entered into by the respondent were composite in nature, involving both goods supply and services, thus constituting works contracts. It was emphasized that the nature of the contract remains the same regardless of the tax regime, and works contracts are specifically classified as such. The Tribunal cited the Supreme Court ruling in Commissioner of Central Excise & Customs, Kerala versus Larsen & Toubro Ltd. to support the non-taxability of works contracts pre-2012.The Tribunal rejected the Revenue's argument to classify works contracts under ECIS, stating that works contracts cannot be treated as services alone for classification purposes. Additionally, the Tribunal dismissed the Revenue's reliance on the respondent's registration under ECIS as conclusive evidence of the service nature. Ultimately, the Tribunal upheld the impugned order, ruling that the respondent was not liable for service tax on the disputed services, and dismissed the Revenue's appeal.In conclusion, the Tribunal's decision clarified the classification of composite works contracts as distinct from ECIS, emphasizing the non-taxability of such contracts pre-2012 and rejecting the Revenue's arguments regarding classification and registration.