2024 (12) TMI 946 - AT - Service Tax

Construction activities with own materials qualify as Works Contract Service, not Construction of Residential Complex Service

Prasanth Sai Builders Versus Commissioner of Central Tax Rangareddy - GST

CESTAT Hyderabad held that appellant's construction activities involving own materials constituted Works Contract Service (WCS) rather than Construction ... Classification of services - Construction of Residential Complex Service (CRCS) or Works Contract Service (WCS)? - period June 2005 to September 2010 - HELD THAT:- In the facts of the case, it is an admitted position that there was no subcontractor involved and that they had undertaken the construction themselves using their own materials, etc. Therefore, their services are more in the nature of WCS and not CRCS. In other words, even if CRCS definition covers the nature of activities undertaken by the appellant, but when it also involves both materials and services, then it is more appropriately classifiable under WCS and not under CRCS. Moreover, it is settled position that WCS came into existence only w.e.f. 01.07.2007 and therefore, the classification of the services would be under WCS. Therefore, even for the period prior to 01.07.2007, the activities would be in the nature of WCS only as it involves material portion as well and therefore, its classification under CRCS would be incorrect. Therefore, the demand made and confirmed under the category of CRCS prior to 30.06.2007 is also not sustainable, in view of the settled law. In so far as the period post 01.07.2010 is concerned, the classification of the service in which material is also involved would be more appropriate under WCS but the same has not been alleged in the SCN and therefore, the demand has been confirmed under wrong classification and on this count itself, it is not sustainable. Therefore, as far as the leviability of Service Tax on activities undertaken by the appellant purportedly under CRCS but more appropriately under WCS is concerned, they would not be leviable till 30.06.2010. In so far as the period beyond 01.07.2010 is concerned, it is observed that the SCN has alleged that the services provided by them were in the nature of CRCS whereas, in view of the factual matrix, it is observed that they are in the nature of WCS and having regard to the judgment of Hon’ble Supreme Court in the case of COMMISSIONER, CENTRAL EXCISE & CUSTOMS VERSUS M/S LARSEN & TOUBRO LTD. AND OTHERS [2015 (8) TMI 749 - SUPREME COURT], WCS cannot be charged to Service Tax prior to 01.07.2007 and it also cannot be subjected to levy when the allegation itself is under the wrong heading i.e., CRCS. Therefore, on this count itself, no demand is sustainable for the period beyond 01.07.2010 up to September, 2010. The Order of Commissioner No. 44/2011 dt.18.11.2011 is not sustainable, except to the extent of amount of Rs.16,20,384/- already paid and appropriated, and therefore set aside - the Appeal is allowed partly. Issues:Classification of services under 'Construction of Residential Complex Service' (CRCS) or 'Works Contract Service' (WCS) for the period June 2005 to September 2010.Analysis:The case involved an appeal by M/s Prasanth Sai Builders against the Original Adjudicating Authority's order confirming a demand of Rs.72,18,624 and imposing a penalty under Section 78 of the Finance Act, 1994 for providing 'Construction of Residential Complex Service' (CRCS) during the period June 2005 to September 2010. The appellant argued that their services should be classified under 'Works Contract Service' (WCS) based on the involvement of both materials and services, citing the judgment of the Hon'ble Supreme Court in Commissioner of Central Excise & Customs Vs M/s L & T. The appellant contended that the demand under CRCS was incorrect as WCS was the appropriate classification. The appellant also highlighted Circular No. 151/2/2012-ST, stating no service tax was leviable for the period before July 2010, regardless of CRCS or WCS classification, as supported by judicial pronouncements. The appellant further argued that for the period post July 2010, the demand under CRCS was unsustainable as the services provided were under WCS. The learned AR acknowledged the proper classification under WCS post July 2007 but emphasized that the appellant had already paid service tax amounting to 16 lakhs. The Tribunal noted that the services provided by the appellant were more in the nature of WCS due to the absence of subcontractors, even before July 2007, making the CRCS classification incorrect. The Tribunal referenced previous judgments to support the non-leviability of service tax for the period before July 2010, regardless of classification. The Tribunal concluded that the demand under CRCS was not sustainable for the entire period in question, except for the amount already paid, and set aside the Original Adjudicating Authority's order.This detailed analysis addresses the issues raised in the judgment, focusing on the classification of services under CRCS or WCS for the specified period and the legal arguments presented by both parties.