2024 (4) TMI 1229 - AT - Central Excise

Tribunal reclassifies service as 'Works Contract Service', rejects extended period tax demand, sets aside previous order.

M/s. K.K. Builders & Engineers Pvt. Ltd. Versus Commissioner of Central Excise (Appeals), Guwahati.

The Tribunal allowed the appeal, classifying the appellant's service as 'Works Contract Service' rather than 'commercial and industrial construction ... Classification of service - commercial and industrial construction services or works contract service - invocation of Extended period of limitation - HELD THAT:- In this case the facts are not in dispute, that the appellant was providing the service along with the materials. In that circumstances, in terms of the decision of the Hon’ble Apex Court in the case of L & T [2015 (8) TMI 749 - SUPREME COURT], the merit classification of the activity is ‘Works Contract Service’ as observed by the Hon’ble Apex Court wherein the Hon’ble Apex Court has observed that 'the finding that Section 67 of the Finance Act, which speaks of “gross amount charged”, only speaks of the “gross amount charged” for service provided and not the gross amount of the works contract as a whole from which various deductions have to be made to arrive at the service element in the said contract.' The merit classification of the service provided by the appellant is ‘Works Contract Service’ and no demand has been raised against the appellant in the ‘Works Contract Service’. In that circumstances, on merits, the demand is not sustainable. Extended period of limitation - HELD THAT:- The demand raised against the appellant by invoking extended period of limitation, also not sustainable. Conclusion - i) The appellant's service should be classified as 'Works Contract Service'. ii) The demand raised by invoking the extended period of limitation also not sustainable. The impugned order is set aside - appeal allowed. The Appellate Tribunal considered an appeal concerning the demand for Service Tax under the category of commercial and industrial construction services for the period from 01.10.2005 to 31.03.2008. The appellant argued that the demand was time-barred as the services were provided between December 2001 to May 2005, and the investigation started in June 2010. The appellant contended that their activity fell under the category of 'Works Contract Service' as they provided the service along with material. The adjudication order confirmed the demand for service tax, interest, and penalties, which was upheld by the Ld. Commissioner (Appeal), leading to the appellant's appeal before the Tribunal.The core issue before the Tribunal was the classification of the appellant's activity as 'Works Contract Service' based on the provision of services along with materials. The Tribunal noted that the facts were undisputed regarding the appellant providing services along with materials. Citing the decision of the Hon'ble Apex Court in the case of L & T (2015 (39) STR 913 (S.C)), the Tribunal emphasized that the taxable services referred to in the charging Section 65(105) of the Finance Act, 1994, pertained to service contracts simpliciter and not composite works contracts. The Tribunal highlighted the Court's observation that in the case of composite works contracts, the service elements should be bifurcated, ascertained, and then taxed separately.The Tribunal concluded that the appellant's service should be classified as 'Works Contract Service' based on the above legal framework and precedent. Consequently, the demand against the appellant under the 'Works Contract Service' category was deemed unsustainable. Additionally, the Tribunal found that the demand raised by invoking the extended period of limitation was also not sustainable. Therefore, the impugned order was set aside, and the appeal was allowed with consequential relief.In summary, the Tribunal's key holdings included the classification of the appellant's service as 'Works Contract Service' in line with legal principles and precedents, the unsustainability of the demand under this category, and the rejection of the demand raised under the extended period of limitation. The Tribunal's decision favored the appellant, setting aside the impugned order and granting relief accordingly.