AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 64
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....rks Contract) Rs. 11,05,937/- (Commercial Construction) along with interest u/s 75 and penalty of Rs. 200/- per day u/s 76 & Rs. 5,000/- u/s. 77 3 ST/26911/2013 28 & 29/2013-ST dated 21.03.2013 07/2010 to 03/2011 Rs. 34,62,213/- (Works Contract) Rs. 27,78,896/- (Commercial Construction) a/w interest u/s 75 and penalty of Rs. 200/- per day u/s. 76 & Rs. 5,000/- u/s. 77 3. Briefly stated, the facts of the present case are that the Appellant is a partnership firm engaged in providing works contract services and had obtained Service Tax registration under service categories of "Works Contract", "Construction of Commercial or Industrial and Civil Structures", and "Construction of Residential Complex". The Appellant during the relevant period filed ST-3 returns in respect of "Works Contract Service", "Construction of Commercial or Industrial and Civil Structures", and "Construction of Residential Complex and paid Service Tax accordingly for the amounts received during the said period. The Appellant during the relevant period has entered into contract agreements with prospective customers for providing works contract services involving provision of both goods and Service....
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....-ST dated 24.08.2010. Additionally, the Hon'ble Andhra Pradesh High Court in Nagarjuna Construction Company Vs. Government of India (2010 (19) STR 321 AP) has upheld the validity of the said Circulars. Therefore the Appellant is not eligible for the benefit of the Composition scheme. The Appellant is not eligible for the abatement provided under Notification No. 01/2006-ST dated 01.03.2006, since the cost of cement and steel provided by the Customers of the Appellant is not included in the gross amount charged. Appellant having registration under 'Construction of Commercial or Industrial and Civil Structure' has provided service under the said heading and not under "Works Contract Services'. Therefore, liable to pay service tax of Rs. 54,81,558/- along with interest and proposed imposition of penalties. Further, for the period July 2010 to March 2011, on the similar grounds as stated for the earlier period, the Respondent held that the Appellant has received an amount of Rs. 3,36,13,717/- against the service provided under the category of 'Works Contract Service' and Rs. 2,69,79,570/- against the service provided under 'Construction of Commercial or Industrial and C....
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....roofing or water proofing, lift and escalator, fire escape staircases or elevators; (b) Construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry, or (c) Construction of a new residential complex or a part thereof, or (d) Completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c); or (e) Turnkey projects including engineering, procurement and construction or commissioning (EPC) projects;" [emphasis supplied] 6. The Learned Counsel submits that on perusal of the aforesaid provision, it can be understood that works contract intends to cover activities which involve - a. Transfer of property in goods, b. Construction of new building, residential apartment, etc., 7. The Learned Counsel submits that on a perusal of the aforesaid definition, it can be concluded that the activity undertaken by the Appellant which involves both sale of goods and construction of buildings would be covered by the same. In this regard, reliance is placed on the case of Commissioner o....
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.... introduction of works contract service is not sustainable. 10. The Learned Counsel submits that on a perusal of the aforesaid submissions, the activity undertaken by them, i.e, a contract which involves both sale of goods and materials as well as provision of service, would qualify as 'works contract'. The activity undertaken by the appellant does not come within the scope of "Commercial or Industrial Construction" and "Construction of Residential Complex". 11. The Learned Counsel submits that they are not engaged in providing services which are taxable under 'commercial construction' or 'residential construction'. In this regard, he submitted that the relevant definitions of the said services as provided under the Finance Act reads as under: Sl. No. Section Definition 1. Section 65(25b) "commercial or industrial construction" means- (a) construction of a new building or a civil structure or a part thereof, or (b) construction of pipeline or conduit; or (c) completion and finishing services such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carp....
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.... assessment of service tax on indivisible works contracts." 13. The Learned Counsel submits that the manner of classification of services is specifically provided in Section 65A of the Finance Act and classification of a service must be done in accordance with the provision of the said section. The relevant portion of section 65A is extracted below: 65 A. Classification of taxable services; (1) For the purpose of this Chapter, classification of taxable services shall be determined according to the terms of the sub clauses of clause (105) of Section 65. (2) When for any reason, a taxable service is, prima facie, classifiable under two or more sub-clause of clause (105) of section 65, classification shall be effected as follows: (i) the sub-clause which provides the most specific description shall be preferred to sub-clauses providing a more general description; (ii) composite services consisting of a combination of different services which cannot be classified in the manner specified in clause (a), shall be classified as if they consisted of a service which gives them their essential character, in so far as this criterion is applicable....
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...., it is submitted that the Appellant is not liable to pay any tax demanded under 'Commercial or Industrial Construction Services' as the said tax demand is raised and confirmed under the wrong head. 16. Learned Counsel submits that they have discharged Service Tax under Composition scheme. Further, the Appellant has discharged Kerala VAT for the majority portion under compounded rate of tax and therefore is eligible for the abatement of 67% with respect to the value of the goods portion in the composite contract. The learned Counsel for the Appellant submitted that for the purposes of paying Service Tax, the Appellant was entitled to avail benefit provided under Notification No. 1/2006-ST dated 01.03.2006. The said Notification provides for abatement of 67% from the gross amount charged for the purpose of payment of Service Tax. In this regard, the learned Counsel for the Appellant placed reliance on the decision of the Hon'ble Ahmedabad Tribunal in the case of P&H Associates Vs. Commissioner of Central Excise and Service Tax, Vadodara reported at (2024) 15 Centax 411 (Tri-Ahm.) wherein it was held that for the period 2008 to 2012, assessee therein was eligible for abetm....
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....of the taxable construction service, being neither monetary or non-monetary consideration paid by or flowing from the service recipient, accruing to the benefit of service provider, would be outside the taxable value or the gross amount charged, within the meaning of the later expression in Section 67 of the Finance Act, 1994; and (b) Value of free supplies by service recipient do not comprise the gross amount charged under Notification No. 15/2004-S.T., including the Explanation thereto as introduced by Notification No. 4/2005-S.T." 18. In the light of the above, the learned Counsel for the Appellant submits that the value of goods and materials obtained 'free of cost' from their customers are rightly not includible in the gross amount charged. It is further submitted that an exemption Notification cannot enjoin a condition that the value of free supplies must also go into the gross amount charged for valuation of the taxable service. 19. Learned Counsel further submits that the Parliament derives the powers to levy Service Tax from Entry 92C of List-I of the Seventh Schedule to the Constitution of India and consequently the States are barred from demanding ....