2025 (8) TMI 8 - AT - Service Tax

Appellant's Work Recognized as Original Under Rule 2A; 60% Abatement Allowed, Interest Partially Upheld

M/s. BDS Infrastech Pvt. Ltd. Versus Commissioner of Central Excise and CGST, Jaipur

The CESTAT held that the appellant's work constituted 'Original Works' under Explanation-I to Rule 2A of the Valuation Rules, as the finishing activities ... Classification of service - work orders executed by the appellant for M/s.Berry Developer & Infrastructure Pvt. Ltd., Gurgaon - Original Works or completion and finishing service? - short payment of service tax - HELD THAT:- In todays’ modern concepts, construction cannot be restricted to merely the brick work or the basic structure of a building. Any building whether residential/non-residential is made useable only after the activities, like in the present case are carried out and which may be termed as miscellaneous civil construction. The project on which the appellant carried out those miscellaneous activities are the two towers raised by the Developer, which is a new construction and were completed by the appellant by carrying out the remaining activities. The term “construction” would involve multifarious activities. In other words, the concept of construction necessarily has an inbuilt part of finishing to make the building/tower/complex habitable and workable. In the context from the “Work load” mentioned in the “Work Orders” read with the letter issued by the Developers, there is no iota of doubt that the work sub-contracted to the appellant was part of the main contract, which is an original work. The “Work Contract Services” provided by the appellant would fall under the purview of the definition of “Original Works” under Explanation-I to Rule 2A of the Valuation Rules. There are no merits in the impugned order and hence, the same is set aside on the issue of granting abatement holding the work carried out by the appellant to be as “Original Works” and, therefore, the appellant are entitled to abatement of 60% and liable to pay service tax on 40% of the total amount charged for the work done. Since the main demand on this account is set aside, the interest and penalty is consequently quashed, however, the interest amount levied on short payment of service tax amounting to Rs.12,05,704/- is maintained as the said amount was deposited though prior to the issuance of the show cause notice yet after lapse of more than 2 years from the due date of payment of service tax. Appeal allowed in part. ISSUES: Whether the work orders executed for construction services constitute 'Original Works' or merely 'completion and finishing service' under the Service Tax (Determination of Value) Rules, 2006.Whether the appellant is liable to pay service tax on 40% or 70% of the gross amount charged for the works contract service.Whether the appellant is entitled to abatement of 60% on the value of works contract service under Rule 2A of the Valuation Rules, 2006.Whether interest and penalty imposed on short payment of service tax are justified. RULINGS / HOLDINGS: The works executed by the appellant are 'Original Works' as defined under Explanation-I to Rule 2A of the Service Tax (Determination of Value) Rules, 2006, since they involve new construction and extensive activities beyond mere finishing or completion work.The appellant is liable to pay service tax on 40% of the total amount charged for the works contract, with an abatement of 60%, as the work falls within the scope of original works under Rule 2A(ii)(A).The demand for service tax calculated on 70% of the gross amount charged is unsustainable and is set aside.Interest and penalty imposed on the short payment of service tax are quashed except for interest on the amount deposited late prior to issuance of the show cause notice, which is maintained due to delay exceeding two years from the due date of payment. RATIONALE: The Court applied the definition of 'Original Works' under Explanation-I to Rule 2A of the Service Tax (Determination of Value) Rules, 2006, which includes 'all new constructions' and related activities necessary to make the building habitable and workable.Precedents considered include decisions where extensive construction activities such as plumbing, waterproofing, carpentry, electrical installations, and finishing works were held to constitute original works rather than mere finishing services.The Court recognized the modern construction concept that 'construction necessarily has an inbuilt part of finishing' and that the appellant's work was part of the main contract for new construction, thus qualifying for the 60% abatement.The Court distinguished between mere finishing/completion services and comprehensive construction services that convert skeletal structures into usable buildings, aligning with prior Tribunal rulings.The interest on delayed payment prior to the show cause notice was maintained due to statutory timelines and the significant delay in payment despite partial deposit.