2018 (11) TMI 1465 – CESTAT CHENNAI – TMI – Commercial Construction services – eligibility for abatement of 67% of the taxable value – Department was of the view that cum-tax benefit has to be calculated first and then abatement should be taken on such value – present case is from April 2007 to March 2009 – Held that:- The contracts entered between the appellant and the service recipient is a composite contract which involves both supply of materials as well as rendering of service.
–
The Tribunal in the case of Real Value Promoters Ltd. [2018 (9) TMI 1149 – CESTAT CHENNAI] had occasion to analyse the issue regarding demand of service tax under construction of residential complex services, commercial or industrial construction service and construction of complex service. The Tribunal has held that prior to 1.6.2007, levy of service tax can be under the above categories only for contracts which are purely for services. That after 1.6.2007, the above categories would be applicable o
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ame they are heard together and are disposed by this common order. 2. Brief facts of the case are that the appellants are paying service tax under the head commercial construction service. The period involved in the first appeal is from April 2007 to September 2007 and the period involved in the second appeal is from October 2007 to March 2009. They are eligible for abatement of 67% of the taxable value as per Notification No. 1/2006 dated 1.3.2006. The appellants are paying service tax taking the gross amount received from the clients as cum-tax value. Department was of the view that cum-tax benefit has to be calculated first and then abatement should be taken on such value. Show cause notices were issued proposing to demand service tax on construction services along with interest and for imposing penalties. After due process of law, the original authority confirmed the demand, interest and penalties in the first appeal. In appeal, Commissioner (Appeals) upheld the same. However the a
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
th sides, it is brought to light that the period involved in the present case is from April 2007 to March 2009. The demand has been raised in the show cause notice under construction of residential complex services. The contracts entered between the appellant and the service recipient is a composite contract which involves both supply of materials as well as rendering of service. The Tribunal in the case of Real Value Promoters Ltd. (supra) had occasion to analyse the issue regarding demand of service tax under construction of residential complex services, commercial or industrial construction service and construction of complex service. The Tribunal has held that prior to 1.6.2007, levy of service tax can be under the above categories only for contracts which are purely for services. That after 1.6.2007, the above categories would be applicable only if the contracts are purely services and which are not composite contracts. Further, it was held that after 1.6.2007, demand in respect o
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
service tax will be levied at only 2 per cent of the total value of the words contract . 7.10 The issue was analyzed by the Hon ble Apex Court in Larsen & Toubro case (supra) and held that there can be no levy of service tax on composite contracts (involving both service and supply of goods) prior to 1.6.2007. This read together with the budget speech as above would lead to the strong conclusion that composite contracts were brought within the ambit of levy of service tax only with effect from 1.6.2007 by introduction of Section 65(105)(zzzza) i.e. Works Contract Services. As pointed out by the ld. counsels for appellants, there is no change in the definition of CICS/CCS/RCS after 1.6.2007. Therefore only those contracts which were service simpliciter (not involving supply of goods) would be subject to levy of service tax under CICS / CCS / RCS prior to 1.6.2007 and after. Our view is supported by the fact that the method / scheme for discharging service tax on the service portion
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
assification of aforesaid services would undergo a change in case of long term contracts even though part of the service was classified under the respective taxable service prior to 1-6-2007. This is because works contract describes the nature of the activity more specifically and, therefore, as per the provisions of Section 65A of the Finance Act, 1994, it would be the appropriate classification for the part of the service provided after that date. 7.12 Thus, for example, while construction of a new residential complex as a service simpliciter would find a place under section 65(105)(30b) of the Act, the same activity as a composite works contract will require to be brought under section 65(105)(zzzza) Explanation (c). For both these categories for the definition of residential complex, the definition given in section 65(105)(91a) will have to be adopted as discussed above will have to be taken into account. 7.13 We find sustenance in arriving at this conclusion by a number of decisio
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
eal, the Revenue submitted that the respondent were engaged in construction services liable to tax under tax entry Section 65(105) (xxq). The grievance of the Revenue is with reference to commercial nature of the construction undertaken by the respondent and not on the correct classification of taxable activity. b. In the case of Skyway Infra Projects Pvt. Ltd. Vs. Commissioner of Service Tax, Mumbai – 2018-TIOL-360- CESTAT-MUM, in respect of identical issue for the period from 2005 to 2012, the Tribunal in para 7 has held as under:- 7. On careful consideration of the submissions made by both the sides, we find that the issue falls for consideration is whether the services rendered by the appellant in respect of 52 contracts entered with various Govt. authorities need to be taxed under MMRC/CICS/ECIS or otherwise. It is on record and undisputed that the adjudicating authority has specifically held that all the 52 contracts which has been executed by the appellants are with material. Le
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
e and we do so. c. In the case of URC Construction (P) Ltd. Vs. Commissioner of Central Excise, Salem – 2017 (50) STR 147, the Tribunal in paragraphs 9, 10 and 11 has held as under:- 9. The Hon ble Supreme Court in re Larsen & Toubro & Ors. has decided thus 24. A close look at the Finance Act, 1994 would show that the five taxable services referred to in the charging Section 65(105) would refer only to service contracts simpliciter and not to composite works contracts. This is clear from the very language of Section 65(105) which defines taxable service as any service provided . All the services referred to in the said sub-clauses are service contracts simpliciter without any other element in them, such as for example, a service contract which is a commissioning and installation, or erection, commissioning and installation contract. Further, under Section 67, as has been pointed out above, the value of a taxable service is the gross amount charged by the service provider for su
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ct service . On the contrary, the submission of the appellant that they had been providing works contract service had been rejected by the adjudicating authority. Therefore, even as the services rendered by them are taxable for the period from 1st June, 2007 to 30th September, 2008 the narrow confines of the show cause notices do not permit confirmation of demand of tax on any service other than commercial or industrial construction service . It is already established in the aforesaid judgment of the Hon ble Supreme Court that the entry under Section 65(105)(zzd) is liable to be invoked only for construction simpliciter. Therefore, there is no scope for vivisection to isolate the service component of the contract. d. In the case of Logos Construction Pvt. Ltd. Vs. Commissioner of Central Excise as reported in 2018 (6) TMI 1361, the Tribunal has held as under:- 5.1 The payment upto 01.06.2007 will get extinguished on account of the law that has been laid down by the Apex Court in the ca
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
of around ₹ 82 lakhs under this category after the visit of the departmental officers and therefore an amount of ₹ 36,88,611/- demanded in the impugned order should be considered as having been discharged. We find merit in his argument and hence the demand of ₹ 26,88,611/- under works contract service for the period 01.04.2008 to 30.09.2008 is required to be considered as having been paid, albeit subsequent to the visit of the officers. However, the interest liability if any that arise on this amount if not paid already will have to be discharged by the appellants. So ordered. 8. In the light of the discussions, findings and conclusions above and in particular, relying on the ratios of the case laws cited supra, we hold as under:- a. The services provided by the appellant in respect of the projects executed by them for the period prior to 1.6.2007 being in the nature of composite works contract cannot be brought within the fold of commercial or industrial constructio
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
e or Construction of Complex Service, cannot therefore sustain. In respect of any contract which is a composite contract, service tax cannot be demanded under CICS / CCS for the periods also after 1.6.2007 for the periods in dispute in these appeals. For this very reason, the proceedings in all these appeals cannot sustain. 6. Following the above decision, we are of the considered opinion that the demand of service tax under commercial or industrial construction service (residential complex) cannot sustain after the period 1.6.2007. The levy of service tax prior to 1.6.2007 cannot also sustain by application of the decision of the Hon ble Supreme Court in the case of Larsen & Toubro Ltd. – 2015 (39) STR 913 (SC). 7. From the discussions made above, we hold that the impugned orders cannot sustain and are set aside. The appeals are allowed with consequential relief, if any. (Operative portion of the order was pronounced in open court) – Case laws – Decisions – Judgements – Orders –
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =