2024 (12) TMI 354 - AT - Service Tax

Tribunal Overturns Tax Demand on Construction and Rent-a-Cab Services; Deems Contracts Non-Taxable Before 2007.

The Tribunal set aside the Service Tax demand on 'Construction Services' and 'Rent-a-cab service,' determining the services were 'Works Contract' and not ... Confirmation of Service Tax demand under 'Construction Services' - Demand of service tax under ‘Rent-a-cab service’ - Benefit of abatement of 67% under Notification No. 1/2006-ST dated 01.03.2006 - time limitation. Construction service - HELD THAT:- The period involved in the present appeal is 2003-04 and 2005-06 and the service tax liability has been confirmed under ‘Construction Services’ whereas both the authorities have admitted that it was ‘Works Contract’ service which involves construction activity and supply of material, thus, making the contracts as composite contract. This issue has been settled by the Hon’ble Apex Court in the case of CCE vs. Larsen & Toubro Ltd [2015 (8) TMI 749 - SUPREME COURT], wherein it has been categorically held by the Hon’ble Apex Court that composite contracts were not taxable under Service Tax prior to 01.06.2007. Demand of service tax under ‘Rent-a-cab service’ - HELD THAT:- The decision of Mumbai Bench of the Tribunal in the case of Rahul Travels vs. CCE, Nagpur [2016 (11) TMI 1294 - CESTAT MUMBAI] is squarely applicable in the present case and the appellant is not liable to pay service tax under ‘Rent-a-cab Service’ or under ‘Tour Operator Service’ because the same was not taxable prior to 01.06.2007. Time Limitation - HELD THAT:- It is found that the entire demand in the present case is barred by limitation because the period of dispute is 2003-04 and 2005-06 whereas the show cause notice was issued on 03.04.2008, which is wholly time barred and the department has not brought any evidence on record to establish suppression on the part of the appellant with intent to evade payment of tax. The impugned order is not sustainable in law and is liable to be set aside - Appeal allowed. Issues:- Confirmation of Service Tax demand under 'Construction Services'- Applicability of abatement under Notification No. 1/2006-ST- Taxability of composite contracts- Demand of service tax on 'Rent-a-cab service'- Barred by limitationConfirmation of Service Tax demand under 'Construction Services':The appellant provided 'Works Contract' and 'Rent a Cab Operator' services to a company. The department issued a show cause notice alleging Service Tax liability. The Adjudicating Authority confirmed the demand ex-parte. The Commissioner (Appeals) upheld the demand but allowed abatement of 67%. The appellant argued that the demand was unsustainable as the services were composite in nature involving supply of material. The Tribunal found that the services were 'Works Contract' and not 'Construction Services,' citing legal precedents. The demand was set aside.Applicability of abatement under Notification No. 1/2006-ST:The Commissioner (Appeals) allowed abatement of 67% under Notification No. 1/2006-ST. The appellant argued that the abatement indicated the services were composite in nature. The Tribunal noted that the abatement was not challenged by the department, indicating the composite nature of the services. The abatement was considered in favor of the appellant.Taxability of composite contracts:The appellant contended that composite contracts were not taxable under Service Tax before 01.06.2007, citing legal judgments. The Tribunal agreed, referencing legal precedents and holding that composite contracts were not taxable before the specified date. The demand related to composite contracts was deemed unsustainable.Demand of service tax on 'Rent-a-cab service':The appellant argued that service tax on 'Rent-a-cab service' was not applicable before 01.06.2007, referencing a Mumbai Tribunal decision. The Tribunal found the appellant not liable to pay service tax under 'Rent-a-cab Service' or 'Tour Operator Service' before the specified date. The demand related to 'Rent-a-cab service' was dismissed.Barred by limitation:The appellant contended that the demand for the period 2003-04 and 2005-06 was time-barred as the show cause notice was issued on 03.04.2008. The department failed to prove suppression by the appellant. The Tribunal found the entire demand barred by limitation due to the time lapse between the period of dispute and the issuance of the notice. The demand was considered time-barred and unsustainable.