Relief for Berger Paints: CESTAT Rules Painting Contracts Involving Supply of Paint Classifiable as ‘Works Contract Service’ [Read Order]
CESTAT held that painting contracts involving supply of paint are classifiable as works contract service and not taxable before 01.06.2007.
The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that painting contracts involving supply of paint along with labour are classifiable as “Works Contract Service” and not as “Interior Decorator Service.”
Berger Paints is engaged in manufacture and trading of paints. To promote its business, it provided home painting services through authorised contractors. Customers contacted the company, contractors visited the site, gave estimates, and carried out painting work. Paint was purchased from Berger’s dealers and labour was arranged. The contractor raised invoice to the customer, paid for paint and labour, and remaining amount was given to the appellant.
After audit in 2005, a show cause notice dated 19.05.2005 was issued demanding service tax under “Interior Decorator Service” for the period April 2003 to December 2004. In de novo proceedings, the demand was confirmed. The appellant filed appeal before the Tribunal.
The appellant’s counsel argued that the activity involved both supply of goods and service, so it was a composite contract. They relied on the Supreme Court judgment in Larsen & Toubro case and argued that such activity falls under “Works Contract Service.” They also argued that works contract service became taxable only from 01.06.2007, so for the period before that no tax was payable.
The revenue argued that the activity was similar to interior decorator service and tax was rightly demanded.
The two-member bench comprising Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) observed that the appellant was providing both paint and contractor services for painting at the clients’ premises.
The tribunal observed that when both goods and services are involved, the correct classification would be “Works Contract Service” as laid down by the SupremeCourt in Larsen & Toubro Ltd. The tribunal explained that works contract service became taxable only from 01.06.2007. The period involved in the present case was before that date but the demand was not sustainable in law.
Accordingly, the Tribunal set aside the impugned order and allowed the appeal with consequential relief.
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