Service Tax Not Applicable to Composite Contracts Pre-June 1, 2007, Construction Services till Period falls under Service Simplicitor: CESTAT [Read Order]

The Chennai bench of the Customs Excise and Service Tax Appellate Tribunal ( CESTAT ) ruled that the demand for service tax cannot be sustained under the construction of residential complex services and commercial/Industrial construction service.

The appellants M/s. Urgentechs are engaged in providing construction services and have registered with the Department under ‘Construction of Residential Complex Services’ and also under ‘Commercial / Industrial Construction Services’. On the basis of intelligence that the appellant has not discharged appropriate service tax, the accounts of the appellant were verified. It was noted that the appellant has not paid service tax under Construction of Residential Complex Services and Commercial / Industrial Construction Services for the period from 2005-06 to 2009-2010. Show Cause Notice was issued proposing to demand service tax under the above categories along with interest and also for imposing penalties.

After due process of law, the Original Authority confirmed the demand under Construction of Residential Complex Service and Commercial / Industrial Construction Service. The Original Authority also imposed penalties. Aggrieved by such order, the appellant preferred appeal before the Commissioner (Appeals) who upheld the same.

Mr. G Natarajan representing the appellant submitted that the appellant has provided construction services which are composite in nature as it involves use of materials as well as rendition of services. The counsel advertised a sample contract enclosed in the appeal paper book dated 12.08.2009 entered with the nuclear Power Corporation of India Limited, Kudankulam.

It was submitted that as per the decision of the Apex Court in the case of Commissioner of Central Excise vs. Larsen and Toubro Ltd.  It was held that composite contracts cannot be subject to levy of service tax prior to 01.06.2007 and also held that the construction services till the period of 01.06.2007 would fall under service simplicitor only. The said decision was applied by the Tribunal in the case of Real Value Promoters Pvt. Ltd. vs. Commissioner of Central Excise wherein it was held that composite contracts involving transfer of property in goods should be subject to levy of service tax under works contract service only.

Further submitted that as per the decision of the apex court in the case of Commissioner of Central Excise vs. Larsen and Toubro Ltd.  and also held that the construction services till the period of 01.06.2007 would fall under service simplicitor only. The said decision was applied by the tribunal in the case of Real Value Promoters Pvt. Ltd. vs. Commissioner of Central Excise wherein it was held that composite contracts involving transfer of property in goods should be subject to levy of service tax under works contract service only.

The bench found that the decision laid down by the tribunal in the case of Real Value Promoters Pvt. Ltd.(supra) would be squarely applicable. The said decision has been followed by the tribunal in the case of Jain Housing & Construction Limited (supra) and was upheld by the apex court reported in by dismissing the department appeal.

The two member bench of the tribunal comprising Vasa Sesha Giri Rao (Technical member) and Sulekha Beevi C.S (Judicial member) considered the opinion that the demand cannot sustain and required it to be set aside. Accordingly, the impugned order was set aside. The appeal was allowed.

To Read the full text of the Order CLICK HERE

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