The Allahabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the service tax demand on the works contract involving the supply of materials under ‘supply of manpower services’ on the ground of violation of section 68 of the Finance Act,1994.
UP Bridge Corporation, the appellant assessee was registered for payment of service tax under the Reverse Charge Mechanism on taxable services namely Goods Transport Agency Service and Rent-a-Cab Operator Service as per provisions of Section 68 of Finance Act, 1994 and also engaged in performing different activities like shuttering, fixing & removal; pouring of concrete; curing; reinforcement steel cutting bending and placement; shifting of material.
The assessee appealed against the order passed by the Commissioner (Audit) Customs, Central Goods & Service Tax for confirming the service tax demand amounting to Rs.72,73,695/- and for the imposition of the penalty.
S K Mathur, the counsel for the assessee contended that as per the General Terms and Conditions of the assessee’s agreement, all these are works contracts involving the supply of material and labor. They cannot be in any case, treated as a supply of manpower.
Sarweshvar T Khaimar, the counsel for the department contended that the demand had been made under a partial reverse charge mechanism, treating these supplies as taxable services under the category of ‘Manpower Supply Agency Services’.
The Bench observed that in respect of the Works Contract Services the charge of service tax was on the service provider and not on the service recipient in terms of the above provisions. Accordingly, the demands made by the revenue by invoking the provisions of Section 68 (2) of the Finance Act do not stand in the test of law.
The two-member bench comprising P K Choudhary (Judicial) and Sanjiv Srivastava (Technical) quashed the service tax demand against the assessee while allowing the appeal filed by the assessee.
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