Works contract services including road construction not subject to service tax before June 2007

CESTAT Kolkata held that construction services including laying solid, trenches construction, and connecting trenches at road crossings provided with materials during 2004-05 to 2007-08 constituted works contract service, not commercial or industrial construction service. Following SC precedent in Larsen Toubro case, works contracts were not subject to service tax before 1.6.2007. Since no demand was raised under works contract service category for the relevant period, appellant was not liable for service tax under commercial or industrial construction service. The show cause notice invoking extended limitation period was invalid. Appeal allowed, impugned order set aside.

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Issues involved: Determination of liability to pay Service Tax for construction services under the category of "commercial or industrial construction service" during the period from 2004-05 to 2007-08.

Issue 1 - Classification of services as works contract:
The primary issue before the Appellate Tribunal was whether the appellant is liable to pay Service Tax for the service of construction under the category of "commercial or industrial construction service" during the specified period. The Tribunal noted that the Revenue did not dispute that the services were provided by the appellant along with materials. The Tribunal referred to the classification of the services as "works contract service," as established by the Hon'ble Apex Court in previous cases. The Tribunal highlighted the distinction between works contracts and contracts for services simpliciter, emphasizing that works contracts are recognized as a separate species of contract that must be taxed separately.

Issue 2 - Application of extended period of limitation:
Another key issue addressed in the judgment was the invocation of the extended period of limitation in the Show Cause Notice issued to the appellant. The Notice was issued on 20.04.2010 for the period spanning from 2004-05 to 2007-08. The Tribunal considered the implications of invoking the extended period of limitation in this case and its impact on the proceedings.

Conclusion:
Based on the analysis of the issues at hand, the Appellate Tribunal held that no demand had been raised against the appellant under the category of "works contract service" during the specified period. Therefore, the Tribunal concluded that no Service Tax was payable by the appellant under the classification of "commercial or industrial construction service." Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief that may arise from the decision. The judgment was dictated and pronounced in open court by the designated Member.

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