Custom, Excise & Service Tax Tribunal
Larsen &Amp; Toubro Limited vs Raipur on 28 June, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL,
WEST BLOCK NO.2, R.K. PURAM, NEW DELHI-110066
BENCH-DB
COURT -III
Service Tax Appeal No.ST/60811/2013 - CU [DB]
[Arising out of Order-in-Original No. Commissioner /RPR/ 27/
ST/ 2013 dated 31.01.2013 passed by the Commissioner
(Appeals), Central Excise & Service Tax , Raipur-I]
M/s. Larsen & Toubro Limited ...Appellant
Vs.
C.C.E., Raipur ... Respondent
Service Tax Appeal No.ST/57327/2013 - CU [DB] [Arising out of Order-in-Original No. Commissioner /RPR/ 27/ ST/ 2013 dated 31.01.2013 passed by the Commissioner (Appeals), Central Excise & Service Tax , Raipur-I] M/s. Pawan Engineering Works ...Appellant Vs. C.C.E., Raipur ... Respondent Service Tax Appeal No.ST/59197/2013 - CU [DB] [Arising out of Order-in-Original No. Commissioner /RPR/ST/ 57/ 2013 dated 29.04.2013 passed by the Commissioner (Appeals), Central Excise & Service Tax, Raipur-I] M/s. Larsen & Toubro Limited ...Appellant Vs. C.C.E., Raipur ... Respondent Service Tax Appeal No.ST/59238/2013 - CU [DB] [Arising out of Order-in-Original No. Commissioner /RPR/ST/ 57/2013 dated 29.04.2013 passed by the Commissioner (Appeals), Central Excise & Service Tax , Raipur-I] 2 ST/60811, 57327, 59197, 59238/2013 M/s. S.R. Brothers ...Appellant Vs. C.C.E., Raipur ... Respondent Present for the Appellant : Mr.Ankur Goyel, Advocate(Pawan Engg.) Ms. Raveena Rai, Advocate (L&T) Mr. B.L. Narasimhan, Advocate (S.R. Brothers) Present for the Respondent: Mr.Amresh Jain, D.R. Coram: HON'BLE MR. BIJAY KUMAR, MEMBER (TECHNICAL) HON'BLE MRS. RACHNA GUPTA, MEMBER (JUDICIAL) Date of Hearing : 22.052018 Pronounced on : 28.06.2018 FINAL ORDER NO. 52338-52341/2018 PER: RACHNA GUPTA Present is an appeal against order of Commissioner dated 31.01.2013 vide which the demand of Service Tax amounting to Rs.5,30,21,372/- was confirmed alongwith the penalty of the equal amount under Section 78 of the Finance Act. In additions, the penalties under Section 76 & 77 of Finance Act were also imposed. lilas
2. The facts relevant for the disposal of the present appeal are as follows:-
2.1 Appellant M/s. Pawan Engineering Works are the service providers of services like erection, commissioning and installation to M/s.Larsen & Toubro (L & T) who are registered with the appropriate Service Tax Authorities. However the intelligence was gathered that the appellants have not got themselves registered, despite they were providing the taxable services. Resultantly, summons were issued to the principal - Larsen & Toubra Ltd. appellant and the appellant's contractor 3 ST/60811, 57327, 59197, 59238/2013 by the Preventive Office of Central Excise on 13.12.2011 and 27.01.2012 respectively. In furtherance of the statements recorded since L & T has shared the responsibility of the appellant, as far as the payment of Service Tax is concerned, show cause notice dated 17th April 2012 was served upon both of them. The same was adjudicated vide the order under challenge.
3. We have heard ld. Counsel for the appellant and ld. DR for the Revenue.
4. The appellant's arguments were 4 folds:-
4.1 At the outset he has objected the jurisdiction of Commissioner, Raipur, while issuing the impugned show cause notice, as the work in question was executed in the State of Orissa, Bihar and West Bengal i.e. outside the geographical limits of Raipur jurisdiction. In this connection he relied upon the case laws as follows:-
(1) Vihar Aahar Pvt. Ltd. vs. CST, 2013 (32) STR 563 (Tri.- Admd.) (2) CCE vs. Integral Construction Company -
2010 (17) STR 354 (Tri.-Bang.) (3) ITI Equatorial Satcom Ltd. vs. CCE - 2001 (136) ELT 156 (Tri.Chennai) (4) Coimbatore Aero Based Control Sys. (P) Ltd.
vs. CCE-2000 (116) ELT 193 (Tri.-Chennai) (5) Kamla Dials & Devices Ltd. v. CCE -2003 (152) ELT 418 (Tri.- Delhi) (6) Castrol India Ltd. v. CCE - 2003 (156) ELT 762 (Tri.-Mumbai) 4 ST/60811, 57327, 59197, 59238/2013 (7) CCE v. Jeetex Engineering Ltd. - 2001 (130) ELT 801 (Tri.Chennai) (8) Trade & Industries Ltd. v. CCE- 2011 (136) ELT 767 (Tri.-Kol.).
4.2 Secondly, it is submitted that the activity carried out by the appellant is mostly in nature of fabrication, as they being the sub-contractor, were asked to fabricate/manufacture a stool irrespective the said stool was to be fixed to a structure to be fastened to earth but the activity of the appellant cannot be classified as that of erection, commissioning and installation but was purely a manufacture. In this connection he relied upon the case laws as follows:-
(1) Mahindra & Mahindra Ltd. v. CCE - 2005 (190) ELT 301 (Tri.-Del.) (2) Neo Structo Construction Ltd. v. CCE - 2010 (9) STR 361 (Tri.-Ahmd.) (3) Makson Pharmaceuticals ltd. v. CCE - 2006 (202) ELT 129 (Tri.-Mum.) (4) Alumayer India Pvt. Ltd. v. CCER, 2012 (278) ELT 123 (Tri.-Bang.).
4.3 Thirdly, it is impressed upon that whatever is the liability the same has already been paid by the principal i.e M/s. L & T on the overall product as is apparent from their affidavit tendered before the competent authority and also the pleadings on their behalf. Tax once paid, no further liability remains for the appellant/ the sub-contractor to be discharged further. In this connection he relied upon the case laws as follows:-
5 ST/60811, 57327, 59197, 59238/2013 (1) Shri Chakra Tyres Ltd. vs. CCE - 1999 (108) ELT 361 (Tri.-Chennai) (2) CCE v. Maruti Udyog Ltd. - 2002 (141) ELT 3 SC (3) Raj Mahal Hotel v. CCE - 2007 (6) STT 11 (Tri.- Delhi) 4.4 Finally, the show casue notice is alleged as being hopefully barred by time as Department had no justified reason to invoke the extended period. Appeal is accordingly, prayed to be dismissed. In this connection he relied upon the case laws as follows:-
1. Continental Foundation Joint Venture v. CCE-
2007 (216) ELT 177 (SC)
2. CCE v. Damnet Chemicals Pvt. Ltd. - 2007 (216) ELT 3 (SC)
3. Pushpam Pharmaceuticals Company v.CCE-1995 (78) ELT 401 (SC)
4. Vineet Electircal Industries Pvt. Ltd. v. CCE - 2001 (136) ELT 784 (Tri. - Kol.)
5. CCE vs. Raptakos Brett & Co.- 2006 (194) ELT 101 (Tri.-Mum.)
5. While rebutting these arguments, it is impressed upon that the appellant is admittedly providing the taxable services but still admittedly is not registered either under Central Registration or the Local Registration for the purpose. It is also an admission that the Head Office of the appellant is situated in Raipur, as a result, Commissionerate, Raipur was very well competent to issue a show cause notice to the appellant. M/s. S.R. Brothers vs. CCE, Raipur.
6 ST/60811, 57327, 59197, 59238/2013 has been relied upon. The services provided by the appellant is impressed upon as simplicitor service of erection, commissioning and installation, which is very much taxable under sub-clause (zzd) of Section 65 (105) read with Section 65 in (39A) of the Finance Act. The fabrication of stool as is impressed upon by the appellant will not classify the appellants activity as manufacture for the sole reason that the raw- material for the said stool was provided by M/s. Larsen & Toubro itself. Hence, the activity was simply a fabrication before the impugned erection and commissioning or installation. It is impressed upon that appellant cannot be allowed to vivisect his contract/sub-contract towards of taxability. Though M/s. Larsen & Toubro has discharged the liability on the gross value of the entire project but, it is impressed upon, that the tax liability of M/s. Larsen & Toubro and that of the appellant/ the sub-contractor are on different transactions and for different services. Hence, the discharge by Larsen & Toubro cannot be considered as discharge of Service Tax liability of the appellant. Finally with respect to the entitlement of invoking the extended period, it is submitted by the ld. DR that there is an apparent suppression of fact on part of the Proprietor of the appellant Shri Ambika Prasad as such show cause notice is well within time. Appeal is accordingly, prayed to be rejected.
6. Heard both sides and perused the entire records. We observe and held as follows:-
7. When this appeal was filed before this Tribunal vide its order dated 27th May, 2014, while hearing the Stay application 7 ST/60811, 57327, 59197, 59238/2013 the Tribunal had directed the pre-deposit of the entire levy but since the appellant failed to comply, the appeal was dismissed vide order dated 31.07.2014 and appeal under Section 35 G of the Central Excise Act, 1944 was filed by the appellant in the High Court of Chattisgarh at Bilaspur, the same was rejected vide order dated 19th June, 2014 However, an SLP 32961/2015, Hon'ble Supreme Court had directed the Tribunal to restore the appeal and it is after the deposit of the amount as directed by Supreme Court, by the appellant that the impugned appeal was restored.
8. Appellant since has challenged the jurisdiction of Commissioner, Raipur for issuing show cause notice to him as well as his principal M/s.Larsen & Toubro. Plea of jurisdiction being preliminary and the one which will affect the root cause of any adjudication because of settled law that "any decision of the authority having no jurisdiction to adjudicate will be a nullity". Hence, the foremost, we hereby adjudicate the issue of jurisdiction:
8.1 Admittedly, the head office of the appellant exists in Raipur. It is the simultaneous admission that the work executed by the appellant under the impugned work orders is executed at the places in State of Orissa, Bihar and West Bengal. It is the settled law that every person providing all these specified taxable services is required to pay Service Tax.
Service Tax being an indirect tax, its burden is to be borne by the person, who received these services but it is to be collected and paid to the Government Exchequer by the service provider. The gross amount charged by the service provider 8 ST/60811, 57327, 59197, 59238/2013 shall be the value of taxable service for the purpose of computation of service tax. It is also settled that Service Tax is a destination based tax. It is settled that in case the service provider has opted for centralized bill/ accounting system than any Commissionerate where he works or situates, as the case may be, shall have the competent jurisdiction. But if the service provider is regionally registered, the Commissionerate under whose jurisdiction, he is registered, shall have the competent jurisdiction. In the present case, admittedly, the appellant was neither registered centrally nor regionally. The mute question to decide about the jurisdiction is as to whether the place where head office of the non-registered service provider providing taxable service is situated, will give the jurisdiction to the Commissionerate of that area or not.
11. The peculiar fact is that in terms of Rule 4 of Service Tax Rules, 1994 no registration was obtained by the petitioner during the relevant period either under Centralized system or under the regional system i.e. at none of different sites in different States, where the works were executed for M/s. Larsen & Toubro Ltd. This peculiar fact makes all the authorities as relied upon by the appellant for the point of jurisdiction, as non-applicable to the facts of the present case. Further, it is an admitted fact that the appellant is a resident of Raipur within the jurisdiction of Raipur Commissionerate and operates within the domine of that Commissionerate. It is also an admission that all work orders were executed for the appellant at his Raipur's address, and the appellant in furtherance thereof has provided service though at the sites 9 ST/60811, 57327, 59197, 59238/2013 outside the jurisdiction of Raipur. The simultaneous facts also remains is that appellant is not the Site Manager but the service provider only and is based at Raipur with no registration under Service Tax. Thus, we find nothing to conclude that Commissioner, Raipur had no jurisdiction. Also the malafide is apparent on the part of the appellant in the sense that the proprietor of appellant is providing similar services to M/s. Larsen & Toubro only as the sole recipient through its another company under the name and style of M/s. M.R. Engineering and that the said firm of the proprietor of appellant is registered at Raipur. Not only this, the Proprietor got the appellant also registered at Raipur, however, beyond the period of the present show cause notice. These factual findings are sufficient to corroborate our opinion holding a competent jurisdiction in favour of Commissioner, Raipur.
12. Now coming to the second line of argument that the activity done by the appellant was not of erection and commissioning / installation but can well been defined as manufacture, as such, the demand of Service Tax raised by the Department is not sustainable, it is observed. It is observed that vide 5 work orders during the impugned period w.e.f. October, 2007 to May, 2010 M/s. Larsen & Toubro has required the erection and Commissioning/ installation and fabrication services from the contractor including the appellant. Section 65 (39A) of the Finance Act, 1994 defines the term erection, commissioning or installation. Perusal thereof shows that it includes the pre-fabricated or otherwise structures. The appellant has impressed upon the activity done by him not to 10 ST/60811, 57327, 59197, 59238/2013 fall under Section 65 (39A), but to be a manufacture accordingly, to be out of the ambit of Service Tax. To adjudicate upon the argument it is necessary to know as to what the manufacture is. In accordance of Section 2(f) of the Central Excise Act, for an activity to be called as that of manufacturing, it is necessary that a new article should come into existence, as a result of the said activity. The Hon'ble Supreme Court in Hokins Cooker - 1997 (96) ELT 507 (SC) has held that an article even if marketable or deemed marketable would not yet be excisable under Section 3 (1) (a) of the Act without passing the premandatory test of manufacture. The definition also clarified that for an activity to be called as manufacture it must satisfy two basic conditions:
(1) Article should be goods.
(2) It is marketable.
Section 2 (d) of Finance Act, 2008 defined goods as including any article/material or substitutes, which is capable of being bought and sold for consideration and such goods shall be deemed to be marketable. Decision of Constitution Bench of Hon'ble Supreme Court in the case of Delhi Cloth and General Mills Co. Ltd. vs. Union of India- 1997 (1) ELT 199 (SC) has held that for any article to be called as goods, if it is known to be marketed as such and can ordinarily come to the market for being bought and sold, it would fall under the definition of goods and any activity creating such kind of goods will only be called as manufacture. It has also been clarified by Apex Court in the case of Sipla Ltd. vs. CCE - 2008 (225) ELT 403 (SC). The activity which produces product as must 11 ST/60811, 57327, 59197, 59238/2013 be a distinct commodity known in common parlance to commercial community for the purpose of buying and selling, the activity can be called as manufacture but the activity itself will not be sufficient to prove the marketability. Applying these principles to the facts of the present case, no doubt vide the work order, appellant was asked to fabricate a stool and stool in common parlance is a product known to the market to be sold and purchase. But in the given facts, the stool manufactured by the applicant is admittedly of such specifications of shape and size, which restricts it to be marketable in terms of the common parlance attached to its name. Further, this stool was to be fabricated by the appellant with the scrap and steel to be provided by M/s. Larsen & Toubro. Admittedly, the appellant had no ownership to the raw-material for the fabrication of stool. Also that stool apparently and admittedly was for enabling mono-rail beam fabrication and thus, was to be fastened to a structure already embedded into the earth. Seen from any of these angles, the stool in the present case falls out of the definition of goods and for the said reason, out of the definition of manufacture in Section 2 (f) of Excise Act. On the contrary, the activity of the appellant is very much covered under the definition of erection, commissioning and installation services Section 65 sub-section 39 A of the Finance Act, 1994 specifically under sub-clause (f) thereof and as such, is very much taxable under sub-clause (zzd) of Section 65 (105) of the Finance Act as a taxable service.
12 ST/60811, 57327, 59197, 59238/2013
13. Above all, the arguments of appellant itself are contradictory, as at one point of time service Tax liability of appellant is denied on the ground that M/s. Larsen and Toubro has discharged the said liability. On the another point of time it is argued that the activity is not a service, but a manufacture. The said conduct of appellant when read with already observed malafide on part of proprietor of appellant about the registration of one of his firm but not of the other, despite both of them being the providers of taxable services that too to the sole recipient i.e. M/s. Larsen & Toubro Ltd., amounts to suppression with the sole object of tax evasion.
14. Now coming to the next line of argument that M/s. Larsen & Toubro has discharged the tax liability on the overall project, it is observed and Though the ld. Counsel for appellant has impressed upon the statement of its Proprietor Shri Ambika Prasad Shukla as was recorded on 17.02.2012 deposing that the appellants were advised by M/s. Larsen & Toubro, only to not to obtain any Service Tax registration in respect of M/s. Pavan Engineering works, Raipur on the plea that they are paying Service Tax on the same and has also impressed upon the admission of Mr. Manab Basak the Assistant Manager of Larsen & Toubro who vide his statement dated 17th January, 2012 has admitted about discharging the tax liability on the gross value of overall project. But the perusal of Mr. Manab Basak statement when read with the statement of Shri Ashim, Manager, (indirect taxes), M/s. Larsen & Toubro, as recorded on 20th March, 2012, it is apparent that the value of each work order was on the basis of 13 ST/60811, 57327, 59197, 59238/2013 negotiations for a lump sum agreed amount, which may or may not include the Service Tax. Also the responsibility of Service Tax payment as deposited by them lie upon the service provider i.e the sub-contractor and wherever the sub- contractor has raised the bills in view of service charges the same have been paid. It is also there-deposition that M/s. MR. Engineering were levying those charges whereas M/s. Pawan Engineering, the appellant, was not levying the said charges. Once, it is an admitted fact that both these companies were providing the similar services and that M/s. Larsen & Toubro was the sole recipient for both the companies the onus was on the appellant to prove as to why, during the impugned period, only M.R. Engineering Works was registered in Raipur and Pawan Engineering was not registered, and why the former only was discharging the tax liability and later was not.
15. There is no sufficient reasonable explanation or evidence on the part of the appellant. Also there is an affidavit tendered on behalf of M/s. Larsen and Toubro shirking their liability of Service Tax for which the appellant was otherwise liable.
16. As a result of entire above discussion, we are of the firm opinion that the liability which has been discharged by M/s.Larsen and Toubro is on the gross value of the entire project. Appellant being one of the service provider admittedly, providing taxable services to Larsen & Toubro and receiving the service charges from them cannot get absolve his 14 ST/60811, 57327, 59197, 59238/2013 liability towards Service Tax under the pretext of discharge beingmade by the service recipient. Otherwise also, service tax is to be deposited to the Govt. not by the recipient but by the provider, who is the appellant in the present case.
17. Now coming to the final line of argument about invoking the extended period, it is observed and held that as already observed the proprietor of appellant was running 2 companies including the appellant for providing same kind of services to the same sole recipient and that the company other than the appellant was very much registered under Service Tax, from no stretch of imagination, it can be presumed that the proprietor was not aware of the services being rendered by the appellant to be the taxable services. Non-registration of the appellant, in the given circumstances, definitely amounts to suppression of relevant fact, which came to the notice of the Department lately only on the basis of some intelligence gathered by the Preventive Officers of Central Excise. It is also an apparent fact on record that the conduct of appellant had been only uncorroborative who even failed to furnish the relevant information and the transactional documents on the basis of which authority would have been able to proceed to a detailed and critical assessment of liability he had failed to provide even the work orders. The said suppression with such unresponsive obstructive and uncorroborative attitude of the appellant are sufficient for the Department to invoke the extended period for 5 years for issuing the show cause notice.
18. In view of entire above discussion, the authorities relied upon by the appellant are held not applicable to the peculiar 15 ST/60811, 57327, 59197, 59238/2013 facts and circumstances of the present case. We find no infirmity with the order under challenge. The same is hereby upheld and the appeals are hereby rejected.
[Pronounced in the open Court on 28.06.2018] (RACHNA GUPTA) (BIJAY KUMAR) MEMBER (JUDICIAL) MEMBER (TECHNICAL) Anita