Contract involves Services, as well as Supply/Deemed Supply of Goods, can only Classify under head ‘Works Contract Services’: CESTAT [Read Order]

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi has held that the contract involves services, as well as supply/deemed supply of goods, can only be classified under the head “works contract services”.

The appellant, M/s Sconce Global Private Limited is engaged in the business of setting up stalls for various companies at exhibitions. The appellant had classified its services under the head of erection, commissioning and installation service and commercial or industrial construction service prior to June 01, 2007 and it has classified them as “works contract service” after June 01, 2007 when Section 65(105)(zzzza) was introduced as a separate taxable service in the Finance Act, 1994.

The department classified the appellant’s service under the head “Pandal and Shamiana” services. the Commissionerdemanded and confirmed the recovery of differential duty of Rs. 16.75 crores and penalties were imposed under Sections 75, 77, and 78 of the Finance Act, 1994.

The Counsel for the appellant submitted that the appellant prepared detailed specifications and bills of quantity as per the approved design and submits a cost proposal to the client on a turnkey project basis that includes, designing, purchase, procurement, fabrication, installation, etc.involving both providing the service and using the materials in providing them. Such composite works contract can only be classified under the head “works contract service” as per the judgment of the Supreme Court in Commissioner of Central Excise&Customs Vs. Larsen and Toubro Ltd.Therefore, the entire demand is not sustainable. Consequently, the penalties imposed also need to be set aside.

The Tribunal has observed that the appellant’s contract involved provisions of services as well as supply/deemed supply of goods they can only be classified under the head “works contract services” as per the law laid down in Supreme Court in Larsen & Toubro. Such services could not have been charged with service tax under any other head either before or after 1.6.2007.

The Coram of Mr. Justice Dilip Gupta, President, and Mr. P.V. Subba Rao, Member (Technical) has held that “the show cause notices demanding service tax under the head “Pandal and Shamiana services” from the appellant, therefore, cannot be sustained. Consequently, the impugned orders need to be set aside”.

Mr. A.K. Sood and Dr. Radhe Tallo appeared on behalf of the appellant and respondent respectively.

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