2024 (1) TMI 301 - AT - Service Tax

Works Contract Service became taxable from June 1, 2007 following Larsen Toubro precedent, tribunal upholds partial demand

CESTAT Bangalore held that Works Contract Service became taxable from 01.06.2007 following SC precedent in Larsen Toubro Ltd. case, which established that ... Levy of Service Tax - Commercial or Industrial Construction Service - supply of materials like cement, sand, jally, bricks etc., and free supply of materials like ready-mix concrete (RMC) and steel required for the construction of hotels entrusted by M/s. Motels & Infrastructure India Pvt. Ltd. - HELD THAT:- The Works Contract Service became taxable w.e.f. 01.06.2007 as held by the Hon’ble Supreme Court in the case of COMMISSIONER, CENTRAL EXCISE & CUSTOMS VERSUS M/S LARSEN & TOUBRO LTD. AND OTHERS [2015 (8) TMI 749 - SUPREME COURT] and in the said case, it has been held that prior to 01.06.2007, works contract service cannot be subjected to service tax levy by vivisecting the composite service contract, which includes both goods and service. The said judgment has been followed by the Hon’ble Supreme Court in the case of Total Environment Building Systems (P) Ltd. Vs. Deputy Commissioner of Commercial Taxes [2022 (8) TMI 168 - SUPREME COURT]. The impugned order is upheld to the extent of confirmation of demand of Rs.1,15,651/- with interest under ‘Consulting Engineer Service’ and modified by setting aside the demand of Rs.15,00,040/- confirmed against ‘Commercial or Industrial Construction Service’ which in fact is ‘Works Contract Service’. Appeal is partly allowed Issues involved:The issues involved in the judgment are related to the levy of service tax on 'Consulting Engineer Service' and 'Commercial or Industrial Construction Service', as well as the applicability of Works Contract Service and relevant exemptions.Consulting Engineer Service:The appellant did not dispute the levy of service tax on 'Consulting Engineer Service'. The advocate for the appellant referred to the judgment of the Hon'ble Supreme Court in a tax case to support their argument that the question of law can be raised at the appellate stage. The appellant had not seriously disputed the issue of rendering consulting engineer service during the relevant period.Commercial or Industrial Construction Service - Works Contract Service:The appellant contended that they provided 'Works Contract Service' during the relevant period, which included both labour and materials. The appellant claimed that the Works Contract Service became taxable from a specific date as per the judgment of the Hon'ble Supreme Court. The appellant's submission was supported by evidence on record, including bills raised by the architect. The Tribunal upheld the demand for 'Consulting Engineer Service' but modified the decision regarding 'Commercial or Industrial Construction Service' to be considered as 'Works Contract Service' and not subject to service tax.Significant Legal References:- Judgment of the Hon'ble Supreme Court in the case of CCE & C Vs. Larsen & Toubro Ltd.- Notification No.01/2006-ST dt. 01.03.2006- Judgment of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs. Commissioner of Income-Tax- Judgment of the Hon'ble Supreme Court in the case of Larsen & Toubro Ltd.- Judgment of the Hon'ble Supreme Court in the case of Total Environment Building Systems (P) Ltd. Vs. Deputy Commissioner of Commercial TaxesThis judgment by the Appellate Tribunal CESTAT Bangalore addressed the issues surrounding the levy of service tax on 'Consulting Engineer Service' and 'Commercial or Industrial Construction Service'. The appellant's argument regarding the applicability of 'Works Contract Service' and relevant exemptions was considered in light of legal precedents, leading to a modification in the decision regarding the taxability of 'Commercial or Industrial Construction Service'. The Tribunal upheld the demand for 'Consulting Engineer Service' but ruled in favor of the appellant by setting aside the demand for 'Commercial or Industrial Construction Service' as it fell under the category of 'Works Contract Service'.