The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the levy of service tax is only applicable to the service contractors simpliciter not to the indivisible works contract. The Bench held that the service tax levy applied to service contracts simpliciter and not to indivisible works contracts which contained both the elements of transfer of property in goods as well as labor and services and the same were brought under the service tax net for the first time on 01.06.2007.
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 according to section 65(105) of the Finance Act which defines “taxable service” as “any service provided”. All the services referred to in the said sub-clauses are service contracts simpliciter without any other element in them, such for example, a service contract which was a commissioning and installation, or erection, commissioning and installation contract.
Further submitted that no attempt to remove the non-service elements from the composite works contracts has been made by any of the sections by deducting from the gross value of the works contract the value of property in goods transferred in the execution of a works contract.
Tara Prakash, the counsel for the department relied on the decisions made by the lower authorities and contended that the demand raised by the department along with the imposition of penalty and interest was as per the law liable to be sustained.
The two-member bench comprising Ramesh Nair (Judicial) and C.L Mahar (Technical) held that service tax levy applied to service contracts simpliciter and not to indivisible works contracts which contained both the elements of transfer of property in goods as well as labor and services.
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