Custom, Excise & Service Tax Tribunal
-Commissioner Of Gst&Cce(Chennai ... vs M/S. Va Tech Wabag Limited on 18 June, 2025
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT NO. I
Service Tax Appeal No. 40588 of 2020
(Arising out of Order-in-Original No. 45-46 / 2020 dated 19.05.2020 passed by the
Commissioner of GST & Central Excise, Newry Towers, No.2054-I, II Avenue, Anna
Nagar, Chennai 600 040)
Commissioner of CGST and Central Excise ... Appellant
Chennai Outer Commissionerate
Newry Towers No.2054 - I
II Avenue, Anna Nagar
Chennai 600 040
Versus
M/s. Va Tech Wabag Limited ... Respondent
No.17, Wabag House, 200 Feet Thoraipakkam - Pallavaram Main Road Sunnambu Kolathur, Chennai 600 017 APPEARANCE:
Shri Anoop Singh, Authorised Representative for the Appellant Shri P.K. Sahu, Advocate for the Respondent CORAM:
HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) HON'BLE MR. AJAYAN T.V, MEMBER (JUDICIAL) FINAL ORDER No.40624/2025 DATE OF HEARING: 07.04.2025 DATE OF DECISION: 18.06.2025 Per Mr. Ajayan T.V.
The Commissioner of GST & Central Excise, Chennai Outer, Chennai, the appellant herein has taken exception to the impugned Order in Original No.45-46/2020 dated 19.05.2020, whereby the adjudicating authority has dropped the proceedings initiated against the Respondent in terms of the Show Cause Notice No.207/2012 dated 23.04.2012 and subsequent Statement of Demand No.133/2013 dated 22.04.2013. 2
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2. Succinctly, the facts are that the Respondent, is engaged in planning, completion and operation of drinking water and waste water treatment plants for both Municipal and Industrial Sectors and during the relevant period held service tax registration for provision of services under Consulting Engineer Service, Erection, Commissioning or Installation Service, Commercial or Industrial Construction Services, Works Contract Service, Management, Maintenance or Repair Service and Goods Transport Agency Service. Investigation carried out by the department reveals that the Respondent has entered into composite contracts with various parties for design, drawing and detailed engineering construction (Civil Work), procurement, supply, erection, testing, trial run and commissioning of Effluent Treatment Plant, Sewage Plants for lump sum amount, but has not paid service tax towards such Turnkey projects entered prior to 01.06.2007 and executed up to 31.03.2011.
3. The Department was of the view that the services rendered by the Respondent prior to 01.06.2007 would be classifiable under "Erection, Commissioning or Installation Services" and "Commercial or Industrial Construction Service". It also appeared that the Respondent did not pay service tax in respect of the contracts entered before 01.06.2007 even though necessary break-up had been incorporated in the said contracts. Upon the Respondent submitting the details, the 3 ST/40588/2020 department quantified service tax based on such details furnished by the assessee for the years 2006-07 to 2010-11, in respect of contracts entered from 01.07.2003 to 01.06.2007 after allowing abatement of 67% on the gross value as per Notification No. 1/2006 ST and a Show Cause Notice bearing Sl. No. 207/2012 dated 23.04.2012 was issued to the Respondent directing the Respondent to show cause as to why an amount of Rs. 12,77,60,239/-(Rupees twelve crore seventy seven lakh sixty thousand two hundred and thirty nine only) being the service tax payable for the period from 2006-07 to 2010-11 should not be demanded from the assessee under proviso to Section 73(1) of the Finance Act, 1994 along with appropriate interest and penalties should not be imposed under Section 76, 77 and 78 of the Finance Act, 1994. For the subsequent period from April 2011 to March 2012, a Statement of Demand bearing S. No. 133/2013 dated 22.04.2013 was issued to the Respondent under Section 73(1A) of the Finance Act, 1994, placing reliance on the facts and allegations in the previous notice, asking the Respondent to show cause as to why Service Tax of Rs. 55,26,953/-
(Rupees Fifty Five Lakh Twenty Six Thousand Nine hundred and Fifty three only) should not be demanded from the Respondent under Section 73(1) of the Finance Act, 1994, with proposals to demand interest at appropriate rates and also for imposing penalty under Section 76 of the Finance Act, 1994.
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4. After following due process of law, the adjudicating authority has dropped the proceedings initiated under the aforementioned Show Cause Notice as well as the Statement of Demand. Aggrieved, by the same the Revenue has preferred this appeal and is before this Tribunal.
5. Shri. Anoop Singh, Ld. Authorised Representative, appeared and argued for the appellant. While reiterating the grounds of appeal, the submissions advanced are as below:
a) The adjudicating authority should have kept the proceedings in call book as the Department had filed appeals in the Supreme Court against the decision of the Tribunal in similar cases. In view of the ruling of the Hon'ble Supreme Court in UOI v. West Coast Paper Mills, 2004 (164) ELT 375 (SC), once an appeal is preferred and admitted, then the decision of the Tribunal is in jeopardy and accordingly the Commissioner ought to have kept the issue in call book.
b) Though the contracts were for turnkey execution, there are price break ups for different activities and therefore the demand has been correctly made on the taxable activities.
c) The assessee itself had admitted that the services provided by it are taxable under Section 65(105) (zzzza) w.e.f 01-
06-2007 5 ST/40588/2020
d) The adjudicating authority framing only one issue whether the turnkey contracts were taxable as "commercial or industrial construction service" and "erection, commissioning and installation service" was hypertechnical and the adjudicating authority ought to have framed the issue as "whether the levy of service tax attracted on the impugned services provided as per the contract entered prior to 01.06.2007 by the assessee which came into effect from 01.06.2007".
e) Reliance is placed on the master circular dated 10th March 2017 which stipulated that cases in which the Department has gone in appeal to the appropriate authority, the adjudication is to be kept in abeyance. Reliance is placed on the decisions in Kriti Shrimankar v The Commissioner, CGST & CE , 2018 (7) TMI 627, Paper Products ltd v CCE, 1999 (8) TMI- 70- SC, CCE & ST, Rohtak v Merio Panel Product, 2022 (12) TMI 453-SC
6. Shri. P. K. Sahu, Advocate, appeared and argued for the Respondent. Ld. Counsel made the following submissions:
a) There is nothing in law that once the Department's SLP is admitted in Supreme Court, the order challenged ceases to be binding on the authorities below. Reliance was placed on the decisions in Kunhyammed v State of Kerala, (2000) 6 SCC 359, NCB v Dilip Prahlad Naade, AIR 2004 SC 2950, Shree Chamundi Mopeds Ltd v.
Church of South India Trust Association, Madras, 6 ST/40588/2020 AIR 1992 SC 1439 and Pijush kanti Chowdhury v State of West Bengal, 2007 SCC online Cal 267 in this regard to contend that there is no legal compulsion for the adjudicating authority to keep the proceeding in abeyance and not decide the case. That the adjudicating authority by relying on the Hon'ble Supreme Court ruling to decide the issue in appeal has not committed any procedural irregularity in disposing off the proceeding.
b) That the only issue in the proceeding was whether the Respondent was liable to pay service tax under the categories of "commercial or industrial construction service" and "erection, commissioning and installation service" and the adjudicating authority, placing reliance on the Honourable Supreme Court's rulings has examined the issue and held that the composite turnkey contracts executed by the Respondent were not taxable under these categories.
c) That as the activities of the Respondent clearly fell under the category of "execution of works contract" which was not liable for payment of service tax during the relevant period of time prior to 01-06-2007 could not be classifiable under any other taxable category including the categories under which service tax demand was made in the show cause notice and thus no service tax was payable by the Respondent. Reliance was placed on the decisions in CCE v Larsen and Toubro Ltd, 2015 (39) STR 913 (SC), 7 ST/40588/2020 Christy Friedgram Industry v Commissioner of GST and Central Excise Sale, (2024) 18 Centax 295 (Tri- Mad), URC Construction (P) Ltd v CCE, Salem, 2017 (50) STR 147 (Tri-Mad) and H.P Singh Chadha v Commissioner of CGST, Ludhiana (2024) 24 Centax 61 (Tri-Chan).
7. We have heard the rival submissions, carefully perused the appeal records as well as the decisions submitted as relied upon.
8. The sole issue that arises for our determination is whether the impugned Order in Original is tenable in law.
9. We have perused the impugned Order in Original and find that the adjudicating authority has rendered his findings placing reliance on the decision of the Honourable Apex Court in Commissioner of Central Excise and Customs, Kerala vs. M/s. Larsen & Toubro Ltd, 2015 (39)STR 913 (SC), quoting extensively from the said decision, referring to Board's Clarification in DOF No.334/4/2006-TRU dated 28-02- 2006, Board's Circular 128/10/2010 dated 24-08-2010 as well as the Tribunal decisions in Commissioner, Service Tax, New Delhi v. Swadeshi Construction Company- 2018-TIOL-1096-CESTAT-DEL and Skyway Infra 8 ST/40588/2020 Projects Pvt Ltd v CST, Mumbai - -2018-TIOL-360- CESTAT-MUM, went on to hold as under:
" 4.24. It is thus clear that only those contracts which are services simpliciter, not involving supply of materials, will be subject to levy of service tax under Commercial or Industrial Construction Services and Erection, Commissioning and installation services prior to 01.06.2007 and thereafter. This is also clear from the fact that there is no change in the definition of Commercial or Industrial Construction Services and Erection, Commissioning and installation services even after 01-06-2007 while incorporating these services within the scope of works contract service.
4.25. Summing up the discussion in the preceding paragraphs, I state that the services provided by the assessee in respect of the turnkey projects executed by it under composite contracts for the period prior to 01.06.2007 cannot be classified and levied to service tax under Commercial or Industrial Construction Services and Erection, Commissioning and Installation services in the light of the Hon'ble Supreme Court judgement in the case of Larsen & Toubro. Since the nature of services provided by the assessee has not undergone any change after 01.06.2007, such services cannot be classified and levied to service tax under Commercial or Industrial Construction Services and Erection, Commissioning and installation services after 01.06.2007. These services can only be taxed as works contract services 9 ST/40588/2020 from 01.06.2007. The classification sought to be applied and the consequential demand raised under Commercial or Industrial Construction Services and Erection, Commissioning and installation services in terms of the show cause notice and the statement of demand for the period prior to 01-06- 2007 and subsequent to 01-06-2007cannot, therefore, legally sustain. In respect of any composite contract which is in the nature of works contract, service tax cannot be demanded under any taxable service other than works contract service after 01-06-2007. For these reasons, the adjudication proceedings initiated against the assessee in terms of the show cause notice 207/2012 dated 23.04.2012 and Statement of Demand 133/2013 dated 22.04.2013 do not survive."
10. We find that the appellant's challenge to the impugned Order in Original is principally on the ground that the adjudicating authority has not followed the administrative instructions to keep the matter in call book since the Department has preferred appeals against the various decisions of the Tribunal involving the same issue.
11. At this juncture, we find it relevant to reproduce paragraph 22 from the decision in Commissioner of C.Ex & S.T. Rohtak v Merino Panel Product Ltd, 2022 (12)TMI 10 ST/40588/2020 453-Supreme Court, relied upon by the Appellant, which is as under:
"22. Following this, the position of law which materialized was that the Revenue was at liberty to issue circulars on the interpretation or application of different provisions, but Courts and Tribunals would give effect to the decisions of the Supreme Court as the law of the land. Another Constitution Bench of this Court in Commissioner of Central Excise, Bolpur v. Ratan Melting and Wire Industries [(2008) 13 SCC 1 = 2008 (231) E.L.T. 22 (S.C.) = 2008 taxmann.com 1649 (SC)] drew a line in the sand with regard to any future confusion on this point, in definitive terms and held as follows :
"7. Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the Court. it is for the Court to declare what the particular provision of statute says and it is 11 ST/40588/2020 not for the Executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law." (emphasis supplied)
12. Therefore, it is clear that circulars/clarifications issued by the Central Government on the interpretation or application of different provisions merely reflect their understanding of the statutory provisions and if they run contrary to the statutory provisions, they have really no existence in law. Further, it would be wholly inappropriate for a Court or Tribunal to direct that the circular should be given effect to and not the view expressed in a decision of the Apex Court or High Court. Such being the case even in respect of a circular interpreting statutory provisions, when the adjudicating authority, while donning the hat of a quasi-judicial authority performing adjudicatory functions, adheres to judicial discipline and follows a judgement of the Honourable Apex Court that is binding on all Courts, Tribunals and quasi-judicial authorities within the territory of India under Article 141 of the Constitution of India, the said adjudicating authority cannot be faulted on this count in any manner. Thus, while the question whether an adjudicating authority who has in his quasi-judicial capacity adhered to judicial discipline and passed an adjudication order, can be proceeded against for a perceived violation of any administrative instructions, namely as that contained in master circular dated 10th March 2017, 12 ST/40588/2020 itself is moot; conspicuously, there is complete absence of any averment in the grounds of appeal, much less any evidence, that the officer has been proceeded against on the administrative side for the alleged recalcitrant non-adherence to the said administrative circular, to substantiate the earnestness of the ground that the adjudicating authority has by not following the Board's instruction, acted without jurisdiction and put the Department in jeopardy; which itself is indicative of the speciousness of the ground raised. We are of the view that the said contention/ground of the appellant that for non-adherence to the Departmental administrative instructions, the legally tenable order issued by the adjudicating authority in his capacity as a quasi-judicial authority, is required to be set aside, is thus totally misconceived and devoid of merits.
13. We now address the decisions cited by the appellant. The decision in Kirit Shrimankar case of the M.P High Court relied upon by the Appellant was rendered in the context of the assessee challenging the Department Circular directing that the show cause notices, adjudication of which was kept in call book pursuant to the earlier Circulars shall be taken out and be adjudicated in accordance with law. The assesee's challenge therein was negatived and it was held that the adjudicating authority is to proceed for adjudication. The decision in paper products relied upon by the appellant only 13 ST/40588/2020 states that the Department is bound by its circular and is precluded from challenging the correctness of the said circular even on the ground of the same being inconsistent with the statutory provision. The decision in Merino Panel Product relied upon by the appellant, from which we have reproduced paragraph 22 above, also lays emphasis more on the fact that the circulars issued interpreting statutory provisions and rules are binding on the tax administrators and authorities so long as they are in accord with and are not at odds with the statute; at the worst, if they cut down the plain meaning of a statute, or fly in the face of their express terms, they are to be ignored. We do not find any proposition in law stated in any of the decisions cited by the appellant that would support the contention that when an adjudicating authority has proceeded to adjudicate a matter by placing reliance on an Apex Court decision and other binding decisions of the higher judicial forums in strict adherence to judicial discipline, and has passed an order in his quasi-judicial capacity, which is fair, legal and proper, the same is required to be set aside in deference to the Department's administrative instruction to keep the matter in call book. Thus, the case laws relied upon by the appellant are wholly inapplicable and the facts and circumstances therein are distinguishable from the facts and circumstances of this case.
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14. We further find that the appellant has not let in any evidence that in any of the appeals stated to have been preferred by the Department against orders of this Tribunal on merits of the matter in similar cases, the Hon'ble Apex Court has stayed the operation of the orders impugned therein. Thus, in the absence of any stay, merely because the Department's SLP is admitted in Supreme Court, the order challenged does not cease to be binding on the authorities below. In this regard, we find the reliance placed by the Respondent on the decisions in Kunhyammed v State of Kerala, (2000) 6 SCC 359, NCB v Dilip Prahlad Naade, AIR 2004 SC 2950, Shree Chamundi Mopeds Ltd v. Church of South India Trust Association, Madras, AIR 1992 SC 1439 and Pijush kanti Chowdhury v State of West Bengal, 2007 SCC online Cal 267 to contend that there is no legal compulsion for the adjudicating authority to keep the proceeding in abeyance and not decide the case, quite apposite.
15. We also find in the instant case that the demand in the show cause notice (SCN) has been raised on the allegation that the services rendered by the Respondent are classifiable under the categories of "erection, commissioning and installation service" and "commercial or industrial construction service" for the entire period covered in the SCN as well as for the period covered by the subsequent Statement of Demand. Therefore, the adjudicating authority 15 ST/40588/2020 could not possibly have framed the question in the manner in which the appellant has expressed in the grounds of appeal, and then gone on to confirm the demand under the category of "works contract service", completely different from the categories under which the SCN and SOD proposed to classify the services of the Respondent. It is a settled principle in law that when the proposal is not made in the show cause notice, the Department cannot travel beyond the show cause notice. The Judgements of the Honourable Apex Court in Commissioner of Customs, Mumbai v Toyo Engineering India ltd, 2006 (201) ELT 513 (SC) and CCE, Bhubaneswar-II vs. Champdany Industries Ltd, 2009 (241) ELT 481 (SC), lay down the ratio that unless the foundation of the case is made out in the show cause notice, revenue cannot argue in Court a case not made out in the show cause notice. Thus the said ground raised by the appellant in this regard is wholly untenable.
16. We also find that the decision of the adjudicating authority in the impugned order is in line with the final orders rendered by this Tribunal in URC Construction (P) Ltd v CCE, Salem, 2017 (50) STR 147 (Tri-Mad) and H.P Singh Chadha v Commissioner of CGST, Ludhiana (2024) 24 Centax 61 (Tri-Chan).
17. That apart, it is also seen that the decision of the Apex Court in CCE vs. Larsen and Toubro Ltd., 2015 (39) 16 ST/40588/2020 S.T.R. 913 (S.C.), which has been relied upon by the Adjudicating Authority while deciding the matter in Respondent's favour, was further affirmed in no uncertain terms by the Honourable Supreme Court in its decision in Total Environment Building Systems Pvt. Ltd v Dy. Commissioner of Commercial Taxes, 2022 (53) G.S.T.L 257 (S.C), wherein the revenue's request for reconsideration of this binding decision was rejected. The relevant portions are as under:
10.2 While appreciating the prayer/submission made on behalf of the Revenue to re-consider the binding decision of this Court in the case of Larsen and Toubro Limited (supra) and to refer the matter to the Larger Bench, few facts are required to be taken into consideration, which are as under :-
(i) The decision of this Court in the case of Larsen and Toubro Limited (supra) has been delivered/passed in the year 2015, in which, it is specifically observed and held that on indivisible works contract for the period pre-
Finance Act, 2007, the service tax was not leviable;
(ii) After considering the entire scheme and the levy of service tax pre-Finance Act, 2007 and after giving cogent reasons, a conscious decision has been taken by this Court holding that the service tax was not leviable pre- Finance Act, 2007 on indivisible/Composite Works Contract;
(iii) While holding that for the period pre-Finance Act, 2007, on indivisible/Composite Works Contract, the service tax is not 17 ST/40588/2020 leviable, number of decisions have been dealt with and considered by this Court in the aforesaid decision;
(iv) That subsequently, the decision of this court in the case of Larsen and Toubro Limited (supra) has been followed and considered by this Court in the case of Bhayana Builders Private Limited and Ors., (supra);
(v) That after the decision of this Court in the case of Larsen and Toubro Limited (supra) rendered in the year 2015, the said decision has been consistently followed by various High Courts and the Tribunals;
(vi) The decisions of the various High Courts and the Tribunals, which were passed after following the decision of this Court in the case of Larsen and Toubro Limited (supra) have attained finality and in many cases, the Revenue has not challenged the said decisions;
(vii) No efforts were made by the Revenue to file any review application to review and/or recall the judgment and order passed by this Court in the case of Larsen and Toubro Limited (supra). If the Revenue was so serious in their view that decision of this Court in the case of Larsen and Toubro Limited (supra) requires re-consideration, Revenue ought to have filed the review application at that stage and/or even thereafter. No such review application has been filed even as on today.
(viii) Merely because in the subsequent cases, the amount of tax involved may be higher, cannot be a ground to pray for re- consideration of the earlier binding decision, which has been 18 ST/40588/2020 consistently followed by various High Courts and the Tribunals in the entire country.
10.3 Keeping in mind the aforesaid factual aspects, the prayer made on behalf of Revenue to re-consider the decision of this Court in the case of Larsen and Toubro Limited (supra) and to refer the matter to the Larger Bench is required to be considered. (emphasis supplied) The Apex Court then went on to hold as under:
"12. What was said by the Constitution Bench in Indra Sawhney v. Union of India, 1992 Supp (3) SCC 217 and Keshav Mills Co. Ltd. v. Commissioner of Income Tax, Bombay North, Ahmedabad, AIR 1965 SC 1636, on the principle of stare decisis clearly bind us. The judgment of this Court in the case of Larsen and Toubro Limited (supra) has stood the test of time and has never been doubted earlier. As observed hereinabove, the said decision has been followed consistently by this Court as well as by various High Courts and the Tribunals. Therefore, if the prayer made on behalf of the Revenue to re-consider and/or review the judgment of this Court in the case of Larsen and Toubro Limited (supra) is accepted, in that case, it will affect so many other assessees in whose favour the decisions have already been taken relying upon and/or following the decision of this Court in the case of Larsen and Toubro Limited (supra) and It may unsettle the law, which has been consistently followed since 2015 onwards. There are all possibilities of contradictory orders. Therefore, on the principle of stare decisis, we are of the firm view that the judgment of this Court in the case of Larsen and Toubro Limited (supra), neither needs to be revisited, nor 19 ST/40588/2020 referred to a Larger Bench of this Court as prayed, i.e., after a period of almost seven years and as observed hereinabove when no efforts were made to file any review application requesting to review the judgment on the grounds, which are now canvassed before this Court."
18. In light of our discussions above, we hold that there is no illegality or perversity in the impugned order in original, which is clearly tenable on merits, that would compel us to interfere with the same. We are consciously refraining from further detailing in this order similar citations that would show that the impugned order is just, legal and proper, only to avoid prolixity. We uphold the Order in Original No.45- 46/2020 dated 19.05.2020.
The appeal, being devoid of merits, is dismissed.
(Order pronounced in open court on 18.06.2025) (AJAYAN T.V.) (VASA SESHAGIRI RAO) Member (Judicial) Member (Technical) ra