ETA Constructions of India Ltd. Vs Commissioner of CGST & Central Excise (CESTAT Chennai)
Summary: CESTAT Chennai allowed the appeal of ETA Constructions of India Ltd. and set aside the service tax demand raised under Commercial or Industrial Construction Service (CICS) for the period October 2007 to March 2008. The appellant had undertaken construction of the commercial building “Chennai Citi Centre” for Chennai City Centre Holdings Pvt. Ltd. and contended that the contracts were composite in nature, involving both supply of materials and rendition of services.
The Tribunal noted that the Department itself had granted 67% abatement while quantifying service tax in the show cause notice, demonstrating the composite character of the contracts. It held that the demand on such composite contracts could be made only under Works Contract Service (WCS) and could not be sustained under CICS.
The Tribunal followed the principles laid down by the Supreme Court in CCE & Cus., Kerala v. Larsen & Toubro Ltd., 2015 (39) S.T.R. 913 (SC), and its decision in Real Value Promoters Pvt. Ltd., where demands under CICS/RCS/CCS on composite contracts for the period prior to 01.07.2012 were held unsustainable. It also relied upon Jain Housing & Construction Ltd., in which a similar demand involving composite contracts was set aside and the Department’s appeal was subsequently dismissed by the Supreme Court, as well as Sri Rosh Properties Pvt. Ltd. v. CCE & ST. Following these precedents, the Tribunal held that the impugned demand could not survive, set aside the order and allowed the appeal with consequential relief, if any.
Cases Discussed
- Commissioner of Central Excise & Customs, Kerala Vs Larsen & Toubro Ltd., 2015 (39) S.T.R. 913 (SC) — Relied upon for the principle that an indivisible composite contract involving supply of materials and rendition of services is a works contract and cannot be subjected to service tax under a service-simpliciter category applicable to CICS.
- Real Value Promoters Pvt. Ltd. Vs Commissioner of GST & Central Excise, Chennai, Final Order Nos. 42436-42438/2018 dated 18.09.2018 (CESTAT Chennai) — Followed for holding that demands under CICS/RCS/CCS cannot be sustained for the period prior to 01.07.2012 where the contracts are composite in nature.
- Jain Housing & Construction Ltd. Vs CST, Chennai, (2023) 10 Centax 170 (Tri.-Mad.) — Followed; the Tribunal had set aside the construction-service demand where the underlying contracts were composite in nature. The order records that the Department’s appeal was dismissed by the Supreme Court as reported in (2023) 10 Centax 171 (SC).
- Sri Rosh Properties Pvt. Ltd. Vs CCE & ST, Final Order No. 40217/2014 dated 01.03.2024 (CESTAT) — Referred to as taking a similar view on the sustainability of service tax demand involving composite works contracts.
FULL TEXT OF THE CESTAT CHENNAI ORDER
Brief facts are that the appellant was registered with the Department under the categories of ‘Commercial or Industrial Construction Service’ (CICS), ‘Works Contract Service’ (WCS) and ‘Goods Transport Agency Service’ (GTAS).They have provided services to Chennai City Centre Holdings Pvt. Ltd. for construction of ‘Chennai Citi Centre’ which is a commercial building. During verification of their accounts, it was noticed by the department that the appellant has not discharged appropriate service tax under CICS for the period October 2007 to March 2008. A show cause notice dt. 25.03.2009 was issued for the above period proposing to demand service tax under CICS along with interest and for imposing penalty. After due process of law, the original authority confirmed the demand, interest and imposed penalty. On appeal, the Commissioner (Appeals) upheld the same.
2. The Ld. Counsel Ms. G. Varshitha appeared and argued for the appellant. It is submitted that the appellant had classified the works executed by them under WCS after the introduction of such category of services with effect from 1.6.2007. Such works contract services attract levy of VAT and the appellant has discharged VAT as applicable under Tamil Nadu Value Added Tax Act, 2006. The contracts are composite in nature which involve both supply of materials as well as rendition of services. It is clear from the fact that the Department has granted 67% abatement while quantifying the tax payable by the appellant in the SCN. In the case of contracts which are indivisible and composite in nature, the demand can only be made under WCS as held by the Hon’ble Supreme Court in the case of CCE & Cus. Kerala Vs Larsen & Toubro Ltd. – 2015 (39) S.T.R. 913 (SC). The Tribunal followed the said decision in the case of Real Value Promoters Pvt. Ltd.Vs CGST & Central Excise, Chennai vide Final Order No.42436-42438/2018 dated 18.09.2018 by which it was held that the demand under Commercial or Industrial Construction Service / Construction of Complex Service / Construction of Residential Complex Services cannot sustain prior to the period 1.7.2012 in case of composite contracts. The demand in the said case was set aside. The said decision was followed by the Tribunal in the case ofJain Housing & Construction Ltd. Vs CST, Chennai as reported in (2023) 10 Centax 170 (Tri.-Mad.). The Tribunal set aside the demand raised under construction of RCS when the contracts were of composite in nature. The Department filed appeal before the Hon’ble Apex Court against the order passed by the Tribunal. The Department’s appeal was dismissed by the Hon’ble Apex Court maintaining the decision of the Tribunal as reported in (2023) 10 Centax 171 (SC). It is prayed that the appeal may be allowed.
3. Ld. A.R Shri N. Sathyanarayanan appeared and argued for the Department.
4. Heard both sides.
5. The issue to be decided is whether the demand of service tax, interest under Construction of Commercial or Industrial Construction Service for the period prior to 1.7.2012 in the case of works of composite nature is sustainable or not. In the present case, the allegation is that the appellant rendered the services to M/s.Chennai City Holdings Pvt. Ltd. for construction of a commercial complex. As per the quantification of service tax given in para-5 of the SCN, the appellant has been given 67% abatement. This would show that the contracts are composite in nature involving supply of materials as well as rendition of services. The demand under such composite contracts can only be made under the category of WCS. The Tribunal in the case of Real Value Promoters Pvt. Ltd. (supra) had considered the issue as to whether the demand made under CICS / RCS / CCS can sustain for the period prior to 1.7.2012 for composite contracts. The said decision was followed by the Tribunal in the case of Jain Housing & Construction Ltd. (supra) whereby the Tribunal set aside the demand following the decision in the case of Real Value Promoters Pvt. Ltd. (supra). The decision of the Tribunal was maintained by the Hon’ble Apex Court by dismissing the appeal filed by the Department as reported in (2023) 10 Centax 171 (SC).
6. The Tribunal has taken similar view in the case of Sri Rosh Properties Pvt. Ltd. Vs CCE & ST vide Final Order No.40217/2014 dated 01.03.2024.
7. Following these decisions, we are of the considered opinion that the demand cannot sustain. In the result, the impugned order is set aside. The appeal is allowed with consequential relief, if any.
(Order pronounced in the open court on 15.07.2024)
