Service tax demand set aside when notice issued under Works Contract but confirmed under Construction of Residential Complex category

CESTAT Hyderabad allowed the appeal, setting aside service tax demand confirmed under Construction of Residential Complex service category when the Show Cause Notice was issued under Works Contract service category. The tribunal held this exceeded SCN scope and violated natural justice principles as the appellant defended against Works Contract classification without notice of alternative categorization. Additionally, no service tax was payable until 01.07.2010 regardless of service category. The extended period demand was also set aside as time-barred, finding no suppression since the appellant was registered, filed returns regularly, and the issue involved interpretation of taxability clarified through CBIC circulars between 2006-2012.

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Issues Involved:
1. Classification of services under "Construction of Complex Service" vs. "Works Contract Service."
2. Traversing beyond the scope of the Show Cause Notice (SCN).
3. Applicability of Service Tax prior to 01.07.2010.
4. Allegation of suppression and time bar.
5. Validity of the Adjudicating Authority's order and the Revenue's appeal.

Detailed Analysis:

1. Classification of Services:
The primary issue revolves around whether the services provided by the Appellant should be classified under "Construction of Complex Service" or "Works Contract Service." The SCN issued on 24.10.2011 demanded Service Tax under "Works Contract Service" for the period 01.06.2007 to 31.03.2011. However, the Adjudicating Authority confirmed the demand under "Construction of Complex Service" for the entire period from 01.04.2007 to 31.03.2011, which the Appellant contested.

2. Traversing Beyond the Scope of SCN:
The Appellant argued that the Adjudicating Authority traversed beyond the scope of the SCN by confirming the demand under "Construction of Complex Service" instead of "Works Contract Service." The Tribunal agreed, citing precedents such as P.K. Agarwalla vs. Commissioner of Central Excise & Service Tax, Kolkata, and KPR Fertilizers Ltd vs. Commissioner of Customs, Central Excise & Service Tax, Visakhapatnam-II, which held that confirming demands under a different category than specified in the SCN amounts to traversing beyond its scope and violates principles of natural justice.

3. Applicability of Service Tax Prior to 01.07.2010:
The Appellant contended that Service Tax on "Construction of Complex Service" was not payable until 01.07.2010, relying on the case of Modi Ventures vs. Commissioner of Central Tax, Secunderabad-GST. The Tribunal upheld this view, noting that various tribunals and High Courts had consistently held that no Service Tax was payable on such services until 01.07.2010.

4. Allegation of Suppression and Time Bar:
The Appellant argued that the SCN issued on 24.10.2011 for the period 2006-07 to 2010-11 was time-barred and that there was no suppression of facts as they were registered with the Central Excise Department and filed their Service Tax and VAT returns on time. The Tribunal found merit in this argument, noting that the issue involved interpretation and that the Appellant had disclosed all relevant details in their returns. Consequently, the confirmed demand for the extended period was set aside on account of time bar.

5. Validity of the Adjudicating Authority's Order and the Revenue's Appeal:
The Tribunal found that the Adjudicating Authority had erred in confirming the demand under a different classification without issuing a proper SCN to the Appellant. The Revenue's appeal, which sought to rectify this error by reclassifying the services under "Works Contract Service," was dismissed. The Tribunal held that entertaining the Revenue's appeal would mean reviving a legally unsustainable order, which it declined to do.

Conclusion:
The Tribunal allowed the Appellant's appeal on merits, setting aside the confirmed demand under "Construction of Complex Service" and dismissing the Revenue's appeal. Both appeals were disposed of accordingly.

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