The Chennai bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that Service taxis not leviable on consideration received for construction services which are composite in nature.
The appellant M/s.Sakthi Constructions India Pvt. Ltd. is rendering taxable service falling under the category of ‘Construction of Residential Complex Service’. It was found that they had not discharged service tax on the entire consideration received by them for the period June 2005 to September 2006.
Show cause notice was issued to the appellant proposing to demand the short-paid service tax along with interest and also to impose penalties. After due process of law, the original authority confirmed the demand along with interest and imposed penalties. On appeal, the Commissioner (Appeals) upheld the order passed by the adjudicating authority, granted cum tax benefit
It contended that the period involved is before 01.06.2007 which is before the introduction of the definition of “Works Contract Services” in the Finance Act, of 1944. The duty demand has been quantified after allowing abatement by Notification No.1/2006 dt. 1.3.2006. The contracts were composite in nature and included both supplies of materials and services.
A Coram comprising of Mrs Sulekha Beevi C S, Member (Judicial) and Mr Vasa Seshagiri Rao, Member (Technical) observed that composite contracts were brought within the ambit of levy of service tax only with effect from 1.6.2007 by the introduction of Section 65(105)(zzzza) i.e. Works Contract Services. Hence the appellants are not liable to pay service tax on the consideration received for construction services which are composite in nature including both supplies of materials and provision of services for the period before 01.06.2007.
While allowing the appeal, the Tribunal held that the demand cannot sustain and set aside the Impugned order.
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