Demand of Service Tax Imposed for Use of JCB and Tractors on Rental Basis Falls under Service of “Supply of Tangible Goods for Use" without Verifying Relevant Documents: CESTAT directs Re-adjudication [Read Order]

The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) directed re-adjudication to the adjudication authority for the imposition of demand for service tax for the use of JCB and Tractors on the rental basis which falls under the service of supply of tangible goods for use without verifying relevant documents. 

Vrutika Enterprise, the appellant assessee was engaged in providing three different services namely service provided to Rajkot Nagrik Sahkari Bank Limited, Tanna Cranktech Pvt. Limited and Precision Industrial Component are classifiable under "Commercial or Industrial Construction" as defined under Section 65(30a) and 65(25b) read with Section 65 (105)(zzq) of the Finance Act,1994. 

The assessee provided service to Suzlon Infrastructure Limited and Suzlon Infrastructure Service Limited are classifiable under the category of "Erection, Commissioning or Installation" service under Section 65(105)(D) of the Finance Act, in addition to "Commercial or Industrial Construction" service and the service provided are also classifiable under the category of "Works Contract" under Section 65(105)(a) of the Finance Act. 

The assessee appealed against the order passed by the Commissioner, Customs and Central Excise for confirming the demand of service tax of Rs. 2,12,91,371/- under the provision to Section 73(1) of the Finance Act with interest under Section 75 and imposing penalties under Section 78, 76 and 77(2) of the Finance Act. 

PD Rachchh, the counsel for the assessee contended that the service tax was demanded on 2 invoices under the category of "Commercial or Industrial Construction" service even though both the invoices were raised for the use of JCB and tractors on a rental basis and that such service was "supply of tangible goods for use" service, which came into effect from 16.5.2008 cannot be considered as taxable under the category of "Commercial or Industrial Construction" service. 

Further submitted that the benefit of concessional rate of duty under the category of Work's contract may not be denied on account of procedural or technical lapse on their part involved in the failure to take registration under the Work's contract category and non-fling of the contract with the Department, particularly, when they 'were already registered under one of the categories and had also submitted a copy of the contract to the Department at a later stage. 

Tara Prakash, the counsel for the department relied on the decisions made by the lower authorities and contended that the demand for service tax raised by the department on the show cause notice was taxable under the category of commercial or industrial construction service and the demand was as per the law and liable to be sustained. 

The Bench observed that the taxability of the two invoices which they claimed that the same was for raised for use of JCB and tractors on a rental basis and were covered under the service of “supply of tangible goods for use" which was not covered under the Finance Act at the relevant time and the assessee should be given a chance to clarify to the adjudicating authority for supporting of his case. 

The two-member bench comprising Ramesh Nair (Judicial) and C.L Mahar (Judicial) quashed the demand for service tax for the use of JCB and tractors on a rental basis and directed re-adjudication to the adjudication authority. 

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