By TIOL News Service

MUMBAI, OCT 04, 2015: THIS is a Revenue appeal against the order passed by the Commissioner(A), Nagpur.

The issue involved is whether the respondent is liable to discharge service tax during the period 10.09.2004 to 31.03.2008 on an amount received by him towards the work executed, which the department feels, falls under the category of "Commercial and Industrial Construction Service".

It is the claim of the respondent that the work is executed under a "Works contract" hence would be liable for tax only from 01.06.2007.

The adjudicating authority confirmed the demand but the Commissioner(A) held that prior to 01.06.2007 the contract being "Works contract", question of vivisecting the same and demanding duty under "Commercial and Industrial Construction Service" would not arise.

And, as mentioned, Revenue is in appeal before the CESTAT.

The Bench observed that on merits the issue is now decided by the Tribunal in the case of Larsen and Toubro Ltd. V. Commissioner of Service Tax, Delhi - 2015-TIOL-527-CESTAT-DEL-LB. Inasmuch as the full Bench had held that contracts entered into prior to 01.06.2007, even if they are works contract, they can be vivisected and service tax can be demanded.

Following the same, the Bench set aside the O-in-A &upheld the demand of service tax and interest thereof and to that extent the Revenue's appeal was allowed.

The respondent argued that the entire demand is time barred but the Bench rejected this claim on the ground that there was nothing on record to show that the respondent had kept the department informed about the activities.

In the matter of the plea of the AR that penalty u/s 76 of the FA, 1994 should be imposed on respondent, the CESTAT observed that the same is unwarranted as the entire issue viz. whether the composite contract/works contract should be vivisected or not was the question of dispute before the judicial forum and it was only by the five Members full Bench decision of the Tribunal in March 2015 that the issue was settled and hence the issue being a question of classification and the valuation, the respondent could have entertained a bonafide belief as to non-applicability of service tax on the contract executed by them. Holding that there existed a reasonable cause for non-discharging service tax for the material period, by invoking the provisions of Section 80 of the FA, 1994 the Tribunal waived the imposition of penalty u/s 76 of the FA, 1994.

The appeal was disposed of.

In passing: The above order is dated 13.08.2015. Incidentally, the LB decision - 2015-TIOL-527-CESTAT-DEL-LB dated 19.03.2015 is no longer a good law in view of the Supreme Court decision delivered on 20.08.2015 - 2015-TIOL-187-SC-ST. So, what next? An appeal or ROM for the sake of it…

(See 2015-TIOL-2102-CESTAT-MUM)