SAB Industries Limited Vs Commissioner of Central Excise and Service Tax (CESTAT Chandigarh)
In a significant ruling, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Chandigarh, quashed a penalty imposed against SAB Industries Limited. The tribunal held that once service tax has been levied under the category of ‘Commercial Construction Service’, it cannot be demanded again under the category of ‘Works Contract Service’.
The case centered on construction work carried out by SAB Industries Limited under a contract with the State Industrial Development Corporation Uttrakhand Limited (SIDCUL) during the period January 2005 to March 2008. The Department of Revenue classified these services under the ‘Commercial or Industrial Construction Service’ category, seeking to demand a hefty service tax alongside penalties.
The appellant argued that the adjudicating authority acknowledged the contract’s composite nature, involving both work and materials, rendering it a ‘Works Contract’ and thereby only liable for service tax post July 2007, based on a previous Supreme Court ruling. The tribunal found the appellant’s contracts to be non-vivisectible between labour and materials and thus agreed that they fell under the ‘Works Contract Service’ category, chargeable to service tax only from 01.06.2007.
The CESTAT’s decision serves as a significant precedent, clarifying the levy of service tax under different categories. It reiterates that once the service tax has been levied under the ‘Commercial Construction Service’ category, it cannot be re-demanded under ‘Works Contract Service’. The ruling also emphasizes the importance of correctly identifying the nature of the contract to accurately apply tax laws.
FULL TEXT OF THE CESTAT CHANDIGARH ORDER
The appellants, M/s SAB Industries Limited, have filed this appeal against the impugned order dated 15th December 2010 passed by Commissioner of Central Excise, Chandigarh.
2. Brief facts of the case are that the appellants have carried out Construction works under a Contract with M/s SIDCUL (State Industrial Development Corporation Uttrakhand Limited) during the period January 2005 to March 2008. On an Audit conducted on the records of the appellant, it appeared to the Revenue that the appellants are rendering taxable service under the category of Commercial or Industrial Construction Service classifiable under Section 65 (105) (zzq). A show cause notice dated 08.04.2010 was issued to the appellants seeking to demand Service Tax of Rs.6,23,80,945/- along with interest while seeking to impose penalties under Section 76, 77, 78 of Finance Act, 1994. The said show cause notice was adjudicated by the Commissioner of Central Excise confirming the demand of Rs.50,71,431/- and imposing equal penalty under Section 78 and applicable penalty under Section 77 of the Finance Act, 1994. Learned Adjudicating Authority has extended the benefit of cum-tax value; benefit on account of security advance and the benefit of Notification No.15/2004-ST dated 10.09.2004.
3. Shri Sudeep Singh Bhangoo, learned Counsel appearing on behalf of the appellants submits that the Adjudicating Authority has acknowledged the fact that in terms of the Contract, there is involvement of material in addition to the work carried out and that no material was supplied by M/s SIDCUL. He submits that the Contract entered in to by the applicant with M/s SIDCUL is indivisible Composite Works Contract as material was involved, the fact of which is not disputed by the Revenue. He submits that such contracts are chargeable to duty only with effect from 01.07.2007 as held by the Hon’ble Supreme Court in the case of CCE and Customs, Kerala Vs Larsen & Tubro Limited-2015 (39) STR 193 (SC). He also relies upon:
