The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashed service tax demand under Works Contract Service and noted that the extended period of limitation is not invokable in the said case.
An inquiry was conducted by the department and certain details were called from the appellant, Bajrang Lal Gupta. Based on the information/documents received from the appellant, the department noticed that the appellant had not discharged service tax on the construction services rendered by it to Housing Board of Haryana.
As per the department, the total consideration of Rs. 3 crores received by the appellant for construction of residential houses is taxable under the taxable category of Construction of Complex Services as defined under 65 (105) (zzh) read with Section 65 (30a) of the Finance Act, 1994.
On these allegations, the department had issued a show cause notice to the appellant dated 03.07.2008 proposing service tax demand of Rs. 11 lakhs after extending the benefit of abatement of 67% under the Notification No. 1/2006-ST dated 01.03.2006.
The Chartered Accountant submitted that it is an admitted fact that the contract between the appellant and the Housing Board of Haryana involves both supply of material and labour and is rightly classifiable under the category of Works Contract Services rather than Construction of Residential Complex Service and that the works contract service was not taxable prior to 01.06.2007.
The Chartered Accountant submitted that since the works contract service came into existence from 01.06.2007, therefore the demand for the entire disputed period is liable to be dropped as indivisible contracts are specifically made taxable under the category of Works Contact Services. He also submitted that it is a well settled legal position that services which are classifiable under the specific taxable category of services, the same cannot be made taxable.
A Two-Member Bench of the Tribunal comprising SS Garg, Judicial Member and P Anjani Kumar, Technical Member observed that “In the case of Srishti Construction vs. Commissioner of Central Excise & ST, Ludhiana, the Division Bench of this Tribunal has also set-aside the demand of service tax under Works Contract Service and has also held that the extended period of limitation is not invokable and allowed the appeal of the appellant with consequential relief, if any, as per law.”
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