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2023 (5) TMI 764 - AT - Service Tax
Classification of services - activity of preparation of site for the power plant - site formation and clearance, excavation and earthmoving and demolition services or not - payment of service tax through credit also rejected on the ground that the invoices against which credit was availed were not issued to the Bhilai premises of the appellant - CENVAT Credit.
HELD THAT:- What transpires from a perusal of Annexure “A‘ (containing description of the work to be carried and amount to be paid) is that the work order is a composite contract comprising services as well as goods. This would be clear from serial no. 6 of annexure which mentions “Earth work in excavation for levelling and grading using borrowed good earth‘. It specifies that borrowed good earth has to be arranged by the contractor at its own cost. There can be no manner of doubt that the work order comprises both the service element as well as the goods element.
The Supreme Court in Larsen & Toubro [2015 (8) TMI 749 - SUPREME COURT] drew a distinction between the service contracts simpliciter and a composite works contracts which would involve both services and goods and held that it is only w.e.f. June 01, 2007 that composite contracts can be subjected to levy of service tax and not before this date.
It has been found as a fact that the work order in the present case, involves both supply of services as also goods. It is, therefore, a composite contract. In view of the decisions of the Supreme Court in Larsen & Toubro it has to be held that the services performed by the appellant under the work order would fall in the category of “works contract‘ service and not “site formation‘ service. The finding of the Commissioner on this issue, therefore, cannot be sustained and is set aside.
Whether the appellant would be justified in availing CENVAT credit? - HELD THAT:- The Commissioner had examined documents to ascertain whether the appellant was justified in availing CENVAT credit, but in view of the finding recorded in this order that the appellant would not be liable to pay service tax, the appellant cannot avail the benefit of rule 3(l) of 2004 Rules.
Penalty - HELD THAT:- Learned counsel for the appellant, however, pointed out that the appellant had reversed the CENVAT credit availed by it and, therefore, this issue is only academic in nature. Learned counsel for the appellant also submitted that in any view of the matter the penalty imposed on the appellant for wrong availment of CENVAT credit needs to be set aside - This submission of learned counsel for the appellant deserves to be accepted. The issue of tax liability of a sub-contractor in cases where the main contractor had paid service tax was subject matter to litigation and, therefore, no mala fides can be attributed to the appellant. The penalty imposed on the appellant, therefore, deserves to be set aside.
Interest - HELD THAT:- Interest cannot be imposed on the appellant as demand of service tax is not sustainable and credit was reversed by the appellant.
The confirmation of demand of service tax deserves to be set aside and is set aside. The imposition of penalty and interest also deserves to be set aside and is set aside - Appeal allowed.