2024 (11) TMI 262 - AT - Service Tax

Tribunal Orders Reconsideration of Appeals, Highlights Supreme Court's Stance on Pre-2007 Works Contract Taxability.

The Tribunal set aside the impugned order and remanded both appeals to the adjudicating authority for a fresh decision. It emphasized the necessity of ... Service Tax demand by invoking the extended period of limitation - service provided by the assessee are considered to be services of erection commissioning and installation provided by the assessee are considered to be services of Erection Commissioning and Installation Servicess - HELD THAT:- We find that as per the arguments of Appellant on the basis of various contracts, it is clear that the contracts are on turnkey basis which were executed in lump sum basis and there is no bifurcation of the material and the service therefore, prima facie the service is of works contract service. On the issue that whether works contract service was taxable prior to 01.06.2007 it has been decided by the Hon’ble Supreme Court in the case of L&T. [2015 (8) TMI 749 - SUPREME COURT] The adjudicating authority has confirmed the demand only on the basis that an SLP was filed by the revenue before the Hon’ble Supreme Court in the case of L&T. Since, the Hon’ble Supreme Court judgment was not before adjudicating authority at the time of passing of adjudication order, in the interest of justice, we are of the view that matter should be reconsidered as per law settled by the Hon’ble Supreme Court in the case of L&T, accordingly we set aside the impugned order and remand both the appeals to the adjudicating authority for passing a fresh order keeping in mind the above observation. Issues:Interpretation of turnkey contracts for Effluent Treatment Plant projects, non-payment of service tax, classification of services under Installation and Commissioning Service, applicability of Works Contract Composite Scheme 2007, demand of Service Tax, consideration of Supreme Court judgments, appeal by both parties.Analysis:The case involved the execution of turnkey projects for Effluent Treatment Plants for various parties, with the respondent not paying service tax under Installation and Commissioning Service due to considering the contracts as complete composite contracts. The respondent did not avail cenvat credit on input and capital goods used in the contracts and later paid service tax under the Works Contract Composite Scheme 2007. The department initiated an inquiry, leading to a show cause notice proposing a demand of Rs. 2,79,72,461 for Service Tax, which was adjudicated to Rs. 1,72,66,282 by the authority. The authority relied on judgments and did not grant relief based on ongoing legal proceedings. Both parties filed appeals against the order-in-original.The appellant argued that all contracts were turnkey projects executed as composite contracts, emphasizing that the nature of service was works contract service, taxable only from June 1, 2007, as per Supreme Court judgments. The appellant cited various cases to support their argument. The Revenue reiterated the findings of the impugned order related to the confirmation of demand and the grounds of appeal.Upon considering the submissions, the Tribunal found that the contracts were executed on a turnkey basis without bifurcation of material and service, indicating works contract service. The issue of whether works contract service was taxable before June 1, 2007, was settled by the Supreme Court in a relevant case. The Tribunal noted that the demand was confirmed based on an ongoing legal matter before the Supreme Court, which was not considered by the authority during adjudication. In the interest of justice and following the Supreme Court's settled law, the Tribunal set aside the impugned order and remanded both appeals to the adjudicating authority for a fresh decision.In conclusion, the Tribunal emphasized the importance of considering the legal position established by the Supreme Court in similar cases and directed a fresh adjudication in light of the settled law.