Nirmal Engineers & Contractors Vs Commissioner (Appeals-I) (CESTAT Delhi)
CESTAT Delhi held that work orders include the charge supply of goods and fixing and finishing of tiles/granite/marbles such composite contracts involving both supply of goods and services are rightly classifiable under ‘work contract services’.
Facts- During the course of audit, it was observed that the appellant had rendered various construction activities to L&T which would be classifiable as ‘commercial or industrial construction’ and ‘works contract services’.
A show cause notice dated 23.10.2012 was issued to the appellant proposing service tax demand of Rs. 16,72,645/- with interest u/s. 75 and penalties under sections 76, 77 & 78 of the Finance Act. The show cause notice also invoked the provisions of section 72 of the Finance Act while proposing the said demand. The Additional Commissioner confirmed the service tax demand amounting to Rs. 16,72,645/- with interest and penalties.
Commissioner (A) dismissed the appeal. Being aggrieved, the present appeal is filed.
Conclusion- On a perusal of sample work orders submitted by the appellant it also transpires that work orders include the charge supply of goods and fixing and finishing of tiles/granite/marbles by L&T. The activity undertaken by the appellant, being composite in nature, shall, therefore, have to be classified as WCS for the reason that the Supreme Court in L &T held that the composite contracts are rightly classifiable under ‘work contract services’.
Mere non-intimation about the option for paying service tax under the composition scheme is a procedural lapse and substantial benefit cannot be denied. Tribunal in M/s. Areva T&D India Limited vs. Commissioner of Central Excise & Service Tax had held that non-intimation of availing the composition scheme is a condonable lapse and the payment of service tax under the composition scheme cannot be denied for WCS.
FULL TEXT OF THE CESTAT DELHI ORDER
M/s. Nirmal Engineers & Contractors1, a proprietorship concern, has filed this appeal to assail the order dated 29.11.2016 passed by the Commissioner (Appeals-I), Service Tax, New Delhi 2 . The Commissioner has confirmed the demand of service tax under the proviso to section 73(1) of the Finance Act 19943 with interest and penalty and the amount of Rs. 4,62,212/- deposited by the appellant has also been appropriated.
2. The appellant, as a sub-contractor, was providing civil construction services to M/s. Larsen & Toubro Limited4. During the period in dispute from 2007-08 to 2011-12, the appellant was awarded miscellaneous civil construction works by L&T by work-orders which involved supply of goods and for fixing and finishing of tiles/granite/marbles. According to the appellant, as these work orders awarded by L&T comprise transfer of material as well as rendition of services, the same being composite in nature would be „works contract services‟ and the appellant could pay service tax after availing the benefit of the composition scheme issued by a notification dated 22.05.2007. The appellant obtained service tax registration on 26.10.2012 for payment of service tax and paid service tax amounting to Rs. 4,62,212/- with interest amounting to Rs. 2,49,147/- after availing the benefit of the composition scheme.
3. An audit of L&T was conducted from 08.05.2009 to 12.05.2009 for the financial years 2007-08 to 2008-09. During the course of audit, it was observed that the appellant had rendered various construction activities to L&T which would be classifiable as „commercial or industrial construction5 and „works contract services‟6.
4. A show cause notice dated 23.10.2012 was issued to the appellant proposing service tax demand of Rs. 16,72,645/- with interest under section 75 and penalties under sections 76, 77 & 78 of the Finance Act. The show cause notice also invoked the provisions of section 72 of the Finance Act while proposing the said demand. The summary of the demand proposed in the show cause notice is as follows:
