Custom, Excise & Service Tax Tribunal
Vrp Constructions vs Salem on 26 March, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT No. I
Service Tax Appeal No. 40542 of 2015
(Arising out of Order-in-Original No.27/2014- (ST - COMMR.) dated 16.12.2014
passed by Commissioner of Central Excise, Salem)
M/s. VRP Constructions, ..... Appellant
59, Appan Nagar,
Nalli Hospital Road, Municipal Colony,
Erode - 638 004.
Versus
The Commissioner of CGST & Central Excise ...Respondent
Salem Commissionerate, No.1, Foulkes Compound, Anai Medu, Salem - 636 001.
APPEARANCE :
Shri J.V. Niranjan, Advocate for the Appellant Shri. N. Satyanarayanan, Authorised Representative, for the Respondent CORAM :
HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) HON'BLE MR. AJAYAN T.V. MEMBER (JUDICIAL) FINAL ORDER No.40397/2025 DATE OF HEARING : 23.01.2025 DATE OF DECISION: 26.03.2025 Per AJAYAN T.V.
The appellant has preferred this appeal against the impugned Order in Original no.27/2014 dated 16.12.2014 (OIO) of the adjudicating authority to the extent the demands of service tax rendered by the appellant during the period 2005-06 to 2009-10 has been upheld along with applicable interest and imposition of penalties.
2. The facts briefly stated are that the appellant is engaged in providing taxable services under Commercial Industrial Construction Services, Management, Maintenance and Repair Services. Upon being enquired by the department, the appellant furnished the details of services provided payments received etc., along with copies of Form 16-A and 2 its annexures. Statements were recorded from Managing Partner of the appellant and based on the Form 16-A and the other documents provided, the department being of the view that the appellant had not registered themselves and failed to discharge the service tax liabilities and had willfully suppressed the material facts, issued a show cause notice calling upon the appellant to discharge service tax on the Management, Maintenance and Repair Services rendered from 16.06.2005 to 26.07.2009, and discharge service tax on Commercial Industrial Construction Services rendered from 16.06.2005 to 31.03.2010 along with applicable interest and proposal for imposition of penalties. After due process of law the adjudicating authority, vide the impugned OIO, dropped the demand under the category of Management, Maintenance and Repair Services in respect of the services rendered by the appellant relating to Government roads but however, confirmed the demand of service tax of Rs.3,31,310/- on the appellant for the taxable services rendered under the category of Management, Maintenance and Repair Services to commercial entities during the period 01.07.2005 to 31.03.2009 and also confirmed a demand of Rs.18,53,351/- for the taxable services rendered under Commercial Industrial Construction Services for the same period along with applicable interest and penalties as more specifically stated therein. Aggrieved by the impugned order in original, the appellant has preferred this appeal and is now before this Tribunal.
3. Ld. Counsel Shri. J.V. Niranjan appeared and argued for the appellant. Ld. Counsel submits that the Adjudicating authority has failed to appreciate the appellant's contention that the construction activities 3 undertaken by the appellant at the police training academy / office premises of Tamil Nadu Police Housing Corporation would not come under Commercial or Industrial Construction Service and the show cause notice does not adduce any evidence to show that the construction and activities undertaken by the appellant would be used primarily for commerce or industry. The Ld. Counsel submits that the building at the police training academy / office premises of Tamil Nadu Police Housing Corporation limited, where the construction activities were undertaken by the appellants is not used for commerce or industry. It is the submission of the Ld. Counsel that the adjudicating authority has confirmed the demand ignoring the following facts, namely, that TNPHC was set up by the government order of Home Department of Government of Tamil Nadu by G.O. No. 2500 (Home) dated 27.09.1980, that Government of Tamil Nadu holds the entire stake in TNPHC, the rent and license fee collected from police personnel for the residential complex owned by TNPHC and let out to such personnel is primarily providing housing and is not a profit making commercial activity. The Ld. Counsel also submitted that the adjudicating authority erred in rendering a finding that CETP is undertaking commercial activities, whereas it ought to have been appreciated that CETP per se are not performing any activities of commerce as there is no buying and selling of goods involved. The activity of CETP of treating the effluence generated by the member units is only to ensure a safe and clean environment and the activity of environment protection is in public interest. The Ld. Counsel placed reliance on the decision of this Tribunal in S. Kadirvel versus CCE & ST, Trichy, 2013 (30) STR 414 (Tribunal -Chennai), wherein it was 4 held that TNPHC worked as an extended arm of government. He also placed reliance on the decision of Hon'ble High Court of Gujarat in the case of Green Environment Service Cooperative Society Limited versus Union of India [2009 (13) STR 250 (Guj.)], wherein the court has held that the treatment of effluents and waste is an activity of environment protection and in public interest.
4. The Ld counsel also submitted that the show cause notice Sl.No.138/2011 (Commissioner) dated 09/12/2011, came to be issued demanding service tax on the following:
Sl. Period Nature of Works Tax Demanded
No
1 2005-06 to 2008-09 Repair & Maintenance of Rs.96,64,497/-
Roads
2 2005-06 to 2009-10 Construction of CETP and Rs.18,53,351/-
Construction at Police
Academy, Chennai ( Tamil
Nadu Police Housing Board
Ltd)
3 2005-06 to 2008-09 Repair & Maintenance Rs.3,21,696/-
works at Police Academy,
Chennai
Total Rs.1,18,49,158/-
5
5. The Ld. Counsel also stated that the learned adjudicating authority has passed the impugned order dropping the demand at Sl.No.1 pertaining to demand on repair and maintenance of Roads.
6. Ld. AR Shri. N. Satyanarayana appeared for the respondent and reiterated the findings in the impugned order in original.
7. Heard both sides and perused the records. We find that the adjudicating authority has proceeded to confirm the demand on the premise that the activities of the appellant at the buildings of police academy/Tamil Nadu Police Housing Board gets covered as commercial and industrial construction.
8. We note that the SCN has reproduced the relevant provisions of the Finance Act, 1994 which are as follows:
(1) Section 65(25b) of the Finance Act, 1994.
"Commercial or industrial construction" means -
(a) construction of a new building or a civil structure or a part thereof;
or
(b) construction of pipeline or conduit; or
(c) completion and finishing services such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services, in relation to building or civil structure; or 6
(d) repair, alteration, renovation or restoration of, or similar services in relation to, building or civil structure, pipeline or conduit, which is -
(i) used, or to be used, primarily for; or (ii) occupied, or to be occupied, primarily with; or (iii) engaged, or to be engaged, primarily in,
commerce or industry, or work intended for commerce or industry, but does not include such services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams." (2) Section 65 (105) (zzq) of the Finance Act 1994 (Act) defines "taxable service" in respect of commercial or industrial construction service as - any service provided or to be provided to any person by any other person, in relation to commercial or industrial construction service. (3) The term "Management and Repair Service" has been defined under clause (64) of Section 65 of the Act, as under :-
"Management, maintenance or repair" means any service provided by-
(i) any person under a contract or an agreement; or
(ii) a manufacturer or any person authorized by him, in relation to,-
(a) Management of properties, whether immovable or not;
(b) Maintenance or repair of properties, whether immovable or not; or
(c) Maintenance or repair including reconditioning or restoration or servicing of any goods, excluding motor vehicle. 7
Explanation- For the removal of doubts, it is hereby declared that for the purpose of this clause,-
(a) "goods" includes computer software
(b) "properties" includes information technology software. (4) Section 65 (105) (zzg) of the Act defines taxable service with respect to management, maintenance or repair service as -
Any service provided or to be provided to any person by any person in relation to management, maintenance or repair.
9. We also note that the impugned OIO has noticed Section 98 of the Finance Act, 2012 which provided as under:
"Special provision for exemption in certain cases relating to management etc. of non-commercial government buildings (section 98) "(1) Notwithstanding anything contained in section 66, no service tax shall be levied or collected in respect of management, maintenance or repair of non-commercial Government buildings, during the period on and from the 16th day of June, 2005 till the date on which Section 66B comes into force."
10. As regards the demand confirmed with respect to the construction activities undertaken in the buildings of Police Academy/office buildings for Tamil Nadu Police Housing Corporation, Chennai, under the category "commercial or industrial construction service," we notice that the appellant has placed reliance on the decisions of the Tribunal 8 in RD Contractor & Company versus CCE & ST, Anand, vide Final Order No. A/10313-10314/ 2023 dated 22.02.2023, where the Tribunal had considered whether the construction service provided to Gujarat State Police Housing Corporation for construction of residential complex for police staff is liable of service tax and has held that there will be no liability on the appellant therein and has allowed the appeal placing reliance on the decision in the case of S. Kadirvel vs. CCE & ST, Trichy, 2013 (30) STR 414 (Tri-Chennai), which too has been relied upon by the appellant. However, in the said decisions the proposals were to cover the appellants therein under the category of "construction of complex" services and the Tribunal noting that the definition excluded such complex intended for personal use, had provided relief on that count. We note that the proposal in the show cause notice in the instant case is to cover the construction activities of the appellant rendered to police academy/TNHPC, under commercial or industrial construction service, given the nature of work which is seen more specifically elaborated in Annexure II to the SCN. Moreover, the appellant too has not raised any specific pleading that the activities of the appellant are more specifically covered under "construction of complex" service. The said decisions therefore are not relevant in the facts and circumstances of this case.
11. Be that as it may, we find the demand of service tax on the services rendered by the appellant in the buildings at police academy/TNHPC is unsustainable, for the reasons infra. On a plain reading of the aforesaid definition of "commercial or industrial construction," it is evident that the essence of the definition is that the "commercial or industrial 9 construction service" is chargeable to service tax only if it is used primarily for, occupied primarily with, or engaged primarily in, commerce or industry or work intended for commerce or industry. We note that the police training academy, TNPHC are Government owned institutions, and in our view are thus not engaged in any commerce or industry. Further, no evidence has been let in that the buildings where the appellant had rendered services are being used for commerce or industry or work intended for commerce or industry. Hence, these buildings are liable to be considered only as non-commercial Government Buildings. Therefore, we hold that the services of construction or repair or maintenance rendered by the appellant to these institutions in these buildings/office premises are not exigible to service tax as commercial or industrial construction services.
12. As regards the proposal to levy service tax on the repair and maintenance work at police academy which has been carried out by the Appellant, we hold that when the Department had already proposed to cover the services of the appellant rendered to the aforesaid policy academy under "commercial or industrial construction service", then we see no reason why the classification of the services rendered by the appellant to police academy in respect of certain activities of repair are thereafter proposed for coverage under the head "management, maintenance or repair service", when the said definition of commercial or industrial construction itself, under section 65 (25b) (d), included "repair, alteration, renovation or restoration of, or similar services in relation to, building or civil structure". As such, when the activities of the appellant are prima facie coverable under the limbs of a particular classification being proposed in the SCN, then 10 artificially separating some activity and categorizing it under yet another classification is arbitrary and thus wholly untenable. We have already found that such buildings of police academy/TNHPC are non- commercial government buildings, while holding that the activities of the appellant carried out therein cannot be considered as commercial or industrial construction service. Therefore, in any event, the said proposal of the revenue to cover the services rendered by the appellant to police academy/TNHPC under "management, repair or maintenance Service" and consequently demand service tax is unsustainable in light of our finding that such Police Academy/TNHPC Buildings are liable to be considered as noncommercial Government Buildings and in view of the retrospective exemption provided under Section 98 (1) of the Finance Act, 2012 as reproduced supra, which stipulates that no service tax shall be levied or collected in respect of management, maintenance or repair of non-commercial Government Buildings. We therefore, hold that the demand of service tax made in the SCN on the aforesaid activities of the appellant with respect to Police Academy/TNHPC are not tenable and are therefore set aside.
13. However, we do not concur with the appellants' contention that the demand of service tax on their activity of construction of common effluent treatment plant (CETP) undertaken on the sub contract awarded to them by M/s. ENKEM Engineers Pvt. Ltd, is not tenable. On the contrary, we find that this Tribunal has on the same issue vide its final order number 41827/2018, dated 18.06.2018, in the case of M/s. Sakthi Engineering Constructions Vs. CCE, Coimbatore,2019 (20) G.S.T.L 553 (Tri-Chennai), considered the aspect of whether 11 the activities of construction of CETP are exigible to service tax. The Tribunal, in the said decision, has also considered the decision in Green Environment Services Coop Society Ltd v Union of India, 2009 (13)STR 250 (Guj), which has been relied upon by the appellant in this case too, and has held that the plea that CETP is not installed for commercial purpose and therefore would not fall under Commercial or Industrial Construction Service, is incorrect. The relevant paras are as under:
5.5 The ld. counsel has relied upon these paragraphs to contend that the ETPs were constructed for the purpose of preventing the pollution, for protection of health of the public and for restoring pollution free environment. That therefore being in public interest, the construction of ETP will not fall under the category of commercial construction. We cannot find much merit in this argument put forward by the ld. counsel for the appellant.
The individual dying units formed various associations viz. M/s. Andipalayam CETP, M/s. Veerapandi CETP and M/s. Mannarval CETP. These associations were formed to construct the CETPs,, who awarded the contract to main contractor M/s. Enkem Engineers (P) Ltd. who subcontracted to appellant and also undertook directly. The construction of CETPS is thus under the behest of the association thus formed. Merely because the contract is awarded by this association, it cannot be said that the CETP is for public interest or for non-commercial purpose. The ld. counsel has adverted our attention to the objectives contained in the Memorandum of Understanding of these associations. It is seen stated that the object of the association is to develop CETP for chemically treating and processing dyeing effluents, sewage waters from commercial establishments, factories, lodge houses, restaurants, residential houses, cinema houses and complexes as per the Pollution Control Board norms. Though CETP takes care of effluents not only of the factories, it can be seen that the said treatment plant is used in a major sense for treatment of effluents of commercial establishments, lodge, restaurants etc. 12 The primary use of this construction of CEPT is therefore for commerce, industry. The ld. counsel has placed reliance on the decision in the case of Green Environment Services Co.op Society Ltd. (supra). In the said case, the petitioner society had contested the demand on two grounds (i) on mutuality (ii) that object of the society is in the nature of public interest. In para 9 of the said judgment, it was observed as under:-
"Having heard the learned counsel for the parties and having regard to the aforesaid aspects, it does appear to the Court that the petitioner-Society has been established with the aid and assistance of the Central Government and the State Government and the petitioner-Society is engaged in the activity of ensuring a safe and cleaner environment by undertaking treatment of industrial effluents and industrial waste materials. This activity for ensuring protection of the environment is certainly an activity in public interest."
5.6 The Hon'ble Court in the above case has only given liberty to the petitioner society to make suitable representation for granting exemption from payment of service tax. The above decision in our view does not assist the appellant. The Hon'ble Court in para 9 of the above case was considering the object of the petitioner's society and held that such activity is in public interest. In the case before us, the Association has not undertaken the construction of ETP. The Association awarded the contract to appellant and others. Thus, the demand has not been raised on the society / association. The service tax demand is on the appellant who is a contractor. Further, the ETP cannot be considered as non-commercial one, since the ultimate beneficiary is the dyeing units who are the polluters. The Hon'ble Court has directed to set up ETP basing on the principle 'polluter pays'. The factories have pooled their funds to construct these ETP. Of course, they have been granted subsidy by the Government and also exemption in excise duty and customs duty. But no 13 exemption of service tax has been granted. Therefore, the contention that CETP is not installed for commercial purpose and therefore would not fall within Commercial or Industrial Construction Service is not tenable. We also do not find any merit in the argument of the ld. counsel that Board Circular No.80/2004-ST dated 17.9.2004 is in support of the appellant and that construction does not fall within the category of commercial construction. We find the issue against the appellant.
13. In view of the aforesaid categorical finding of this Tribunal, we hold that the construction of common effluent treatment plant undertaken by the appellant is liable to be taxed under " Commercial or Industrial Construction" service and the demand of service tax along with interest thereon in respect of the said work carried out by the appellant is correct and tenable in law.
14. We also note that the appellant had neither taken the registration as required under the Finance Act, 1994 and the rules thereunder, nor filed the ST-3 returns that are mandated to be filed by a registered service provider. We also find that the appellant had not raised the plea of bonafides at the first instance during the investigation and had only pleaded ignorance of law. We further find that the appellant too has contributed to the delay in issuance of the show cause notice by approaching the Honourable High Court and obtaining a stay on the proceedings. It is seen that the adjudicating authority has confirmed the demand invoking the extended period and has discussed the applicability of extended period in para 21 of the impugned OIO in detail, which in our view does not require interference in these 14 circumstances. However, in the facts and circumstances of the appellants' case considering that the tenability of the other demands as proposed in the SCN were of debatable nature, even though we have found grounds for imposition of penalty under Section 78 as invoking of extended period is also held to be tenable, nevertheless, in the circumstances, we deem it fit to invoke the provisions of Section 80 as it existed during the relevant period to set aside the penalties imposed, in terms of the decision of the Hon'ble High Court of Karnataka in CST v. Motor World, 2012 (27) STR 225 (Kar), while not disturbing the benefit of dropping of demand as extended to the appellant in the impugned OIO and equally not disturbing the demand of service tax made on the construction activities pertaining to effluent treatment plants rendered by the appellant along with applicable interest thereon which stood confirmed by the adjudicating authority. We find that our view on confirming the demand for the extended period invoked while setting aside the penalties as above is also in consonance with the order of the Tribunal in the case of M/s. Sakthi Engineering Constructions cited supra in similar circumstances, which order has also been affirmed by the Honourable Supreme Court in Sakthi Engineering Constructions v. Commissioner - 2019 (20) G.S.T.L. J181 (S.C.). The impugned order stands modified to the above extent. The appeal is disposed of on the above terms.
(Order pronounced in the open court on 26.03.2025) (AJAYAN T.V.) (VASA SESHAGIRI RAO) Member (Judicial) Member (Technical) psd