2024 (7) TMI 1213 - AT - Service Tax

Tribunal Reclassifies Turnkey Ash Pond Development Contract: No Pre-2007 Service Tax or Penalty Imposed.

M/s. Shree Balaji Engicons (P) Ltd. Versus Commissioner of Central Excise & Service Tax, Bhubaneswar II Commissionerate

The Appellate Tribunal set aside the demand for Service Tax under 'commercial or industrial construction service' for a turnkey ash pond development ... Classification of service - commercial or industrial construction service or works contract service - activity of the appellant namely, turnkey contract for development of ash pond - penalty. Classification of service - HELD THAT:- On going through the scope of work and the agreement placed by the appellant, clearly shows that the services rendered by them include supply of materials also, which is appropriately classifiable under the category of “works contract service”, which is taxable with effect from 01.06.2007. Admittedly, in the case on hand, the service rendered by the appellant falls under the category of “works contract service”, which came into effect from 01.06.2007 and the period involved in this case is prior to the said date. Therefore, it is observed that for the said activity, no service tax is payable by the appellant. In these circumstances, it is held that whole of the demand is not sustainable against the appellant under the category of “commercial or industrial construction service”, which qualified as “works contract service”. Penalty - HELD THAT:- In the facts and circumstances of the case, no penalty is imposable on the appellant. The impugned order is set aside - appeal allowed. Issues:Appeal against demand of Service Tax under 'commercial or industrial construction service' for a turnkey contract for development of ash pond. Classification of services under 'works contract service' based on scope of work and agreement. Applicability of 'works contract service' classification from 01.06.2007. Reference to Supreme Court judgment on classification of services with materials. Imposition of penalty on the appellant.Analysis:The Appellate Tribunal considered the appeal against the demand of Service Tax under the category of 'commercial or industrial construction service' for a turnkey contract for the development of an ash pond. After hearing both parties and reviewing the scope of work and agreement submitted by the appellant, it was observed that the services rendered included the supply of materials, leading to the classification under 'works contract service.' This classification was deemed applicable from 01.06.2007 onwards. The Tribunal referred to a Supreme Court judgment which held that when services are rendered along with materials, it qualifies as 'works contract service.' Consequently, for the period prior to 01.06.2007, the Tribunal concluded that no service tax was payable by the appellant as the activity fell under 'works contract service' rather than 'commercial or industrial construction service.'Regarding the imposition of a penalty, the Tribunal found that in the given circumstances of the case, no penalty was imposable on the appellant. Therefore, the impugned order confirming the demand under the category of 'commercial or industrial construction service' was set aside, and the appeal was allowed with any consequential relief. The decision was dictated and pronounced in the open court by the members of the Tribunal.