In a significant case, the Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that designing and execution of stalls on a customer’s request amounts to work contract service and set aside the demand under ‘interior decorator’.
Praveg Communications India Limited, the appellant is engaged in providing exhibition service, event management service, advertisement service, works contract service etc. They have carried out the activity of conceptualizing, designing and execution of stalls as per the customer’s requirement and for the same, the appellant was assigned work orders from the customers viz. Tourism Corporation of Gujarat Limited, Sports Youth and Cultural Activities Department, All India Conference on Livestock and Dairy Development etc.
The appellant classified the said activity as a works contract under Section 65(105)(zzzza) of the Finance Act, 1994 and availed the benefit of concessional rate of tax under Rule 3(1) of the Works Contract Rules, 2007 and paid service tax at the rate of 4/8%.
It was alleged that the appellant classified the services as works contract services however, there was no sale of goods therefore service cannot be classified under works contract service and service tax @ 12.36% should have been paid by the appellant.
The department proposed to demand service tax amounting to Rs. 1,06,37,604/- under Section 73(1) of the Finance Act, 1994 along with interest and penalty under Section 75, 76, 77(2) and Section 78 of the Finance Act 1994 respectively. The Commissioner confirmed the demand for service tax amounting to Rs. 1,06,37,604/- along with interest for delay in making payment of service tax and penalty.
It was submitted that it was settled law that a contract that provides for the supply of goods as well as labour would be a works contract and to the extent the property in goods passes from the contractor to the principal, the transaction would come within the purview of the extended definition of sale namely transfer of property in goods whether as goods or in some other form.
He submits that in the present case, the ingredients provided for defining Interior Decorator service are not satisfied since the primary ingredient of ‘Interior Decorator Service’ is the provision of service by way of advice, consultancy, technical assistance or in any other manner to the service recipients coupled with planning, designing or beautification of spaces.
It was argued that setting up stalls for exhibitions or events cannot be considered to classify ‘Interior Decorator Service’. The work undertaken by the appellant, by no stretch of the imagination, can be ‘Interior Decorator Service’.
The activity undertaken by the appellant is simply a works contract service since there is both labour and use of material as part of the contract and the property in goods gets transferred in favour of the customers.
It was observed that once such activity is acknowledged by the Department to be a work contract service there is no justification for concluding that similar activities fall under any other category. The Commissioner also observed to be wrong while forming an opinion that the activity of the appellant does not fall under any clause of the definition of works contract services.
A two-member bench comprising Mr Ramesh Nair, (Judicial) and Mr C L Mahar, (Technical) held that the service of the appellant is classified as Works Contract Service and the service tax discharged on the concessional rates under Works Contract Service is correct and legal.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
