Custom, Excise & Service Tax Tribunal
M/S.Rrb Energy Ltd vs Commissioner Of Service Tax, Chennai on 12 May, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
ST/00202 to 00203/2011
[Arising out of Order-in-Original Nos.62 & 63/2010, dated 30.11.2010 passed by the Commissioner of Service Tax, Chennai]
M/s.RRB ENERGY LTD.
APPELLANT
Versus
COMMISSIONER OF SERVICE TAX, CHENNAI
RESPONDENT
Appearance:
For the Appellant Shri Raghavan Ramabhadran, Ms. Swetha Giridhar, Adv/s.
For the Respondent Shri L. Paneerselvan, AC (AR) CORAM:
Honbe Shri D.N. Panda, Judicial Member Honble Shri V. Padmanabhan, Technical Member Date of hearing/decision 12-05-2016 FINAL ORDER NOs. 40904-40905 / 2016 Per D.N. Panda:
Learned counsel submitted that in both the appeals, there are only two different period involved with same facts for which both the cases may be heard analogous and disposed. So also, he says the Order-in-Original is also a common order in both the cases.
2. On behalf of the appellant, learned counsel explains that the dispute in both the appeals arose on five counts:-
(i) The civil work involving erection and commissioning of the wind operated electricity generator has been sought to be taxed under Finance Act, 1994 for the period 10.09.2004 to 31.03.2006raising tax demand of Rs.3,45,91,502/-;
(ii) Erection charges for the period 01.04.2008 to 31.03.2009 was taxed raising demand of Rs.3,24,52,209/- on the ground that no tax was paid on such taxable service provided;
(iii) The licence fee paid to the TNEB for infrastructure development has been sought to be taxed under Finance Act, 1994 for the period 10.09.2004 to 31.03.2009 raising tax demand of Rs.7,63,33,154/-;
(iv) Land development charges, which are in the nature of Transfer of Immovable Property has been sought to be taxed for the period 10.09.2004 to 31.03.2009 raising tax demand of Rs.2,32,94,425/-; and
(v) Denying Cenvat credit for the period 01.10.2006 to 31.03.2008 demand of Rs.4,70,91,013/- has been levied.
3.1 Explaining on the above said disputes, learned counsel submits that in so far as the Civil Work is concerned that relates to erection and installation of the work of electricity generation system which is a composite contract involving the installation of generator as well as execution of Civil Work carried out by the appellant. The generator is duty-free for which no excise duty was leviable.
3.2 So far as execution of Works Contract is concerned that involves civil works as well as various other electrical works meant for installation of generator. Law is well settled in Commissioner of Central Excise & Customs, Kerala Vs Larsen & Toubro Ltd., reported in 2015 (39) S.T.R.913 (S.C.) holding that Works Contract not being intended to be taxed prior to 01.06.2007, there shall not be levy for the period 10.09.2004 to 31.03.2006.As a result of which, the demand of Rs.3,45,91,502/- shall not sustain.
4. Explaining on the taxability of Erection charges, learned counsel submits that there is no dispute that Erection charges shall be taxable. Appellant has also discharged tax liability on such count which shall be subject to verification by the department for the period from 01.04.2008 to 31.03.2009 and appropriated against the demand. If there is deficiency, appellant shall discharge tax liability with interest if any payable.
5. The Development Charges were paid to TNEB in respect of infrastructure development licence. That has been taxed. That not being paid in relation to any services provided by TNEB that is not taxable since. Therefore, the Development Charges shall be out of the ambit of taxation under the provisions of the Finance Act, 1994. Further explaining the issue, learned counsel submits that the appellant as a contractor pays the Infrastructure Charges to TNEB first on behalf of the client and gets reimbursement thereof form by clients.
6. So far as land development Charges are concerned, it was explained that the lands are first acquired by the appellant and, thereafter, transfer thereof made to the clients and on such lands generators are installed. The transaction ipso facto shall be transaction under Transfer of Property Act and by no stretch of imagination that shall be brought to the scope of Finance Act, 1994, since no service is provided in that regard. But, Revenue brought the charges received into Real Estate Services without any basis or foundation in the show-cause notice and taxed. In some cases, lands are transferred directly by the land owner to the clients. That also shall not come within the scope of taxation under Finance Act, 1994. He also explained that there was a confusion by the tax administration and they misconceived in adjudication that land development Charges received were an account of erection charges While allegation was that receipts relates to real estate service provided. Therefore adjudication is beyond the show-cause notice. Show-cause notice provides opportunity of defence. That was issued to explain on the receipt as Real Estate Service. But whatever the case may be, it is neither Real Estate Services nor an Erection Service provided by appellant since the transactions were made under the Transfer of Property Act.
7. The Cenvat credit that was disallowed was on the premise that the input suffering duty were used in the manufacture of generator by appellant. That remained undisputed. However, when the appellant became aware of the law, it discharged duty liability with interest on the input credit taken wrongly and utilised the same. Therefore Revenue did not suffer. Discharge of duty liability is also an admitted fact in para 12.1 of the adjudication order. Learned counsel emphasizes that if at all liability arises on the Cenvat credit issue for Calculation of interest on utilised credit, that shall be governed by the judgment of the Honble Madras High Court in the case of Commissioner of Central Excise, Madurai Vs Strategic Engineering (P) Ltd., reported in 2014 (310) E.L.T.509 (Mad.).
8. Revenue on the other hand supports the adjudication and on each count of dispute submits that Revenue has based its findings on proper examination and tax liability determined appropriately.
9. Heard both sides and perused the records.
10. The appellant was the contractor as well as supplier of the generator manufactured by it. So far as no duty liability on generator is concerned that is not in dispute in the present appeal since duty was exempt thereon. The appellant while supplying the generator had also an obligation to erect and commission the same for its clients. Erection service provided was purely a Works Contract Service since that involved Civil Works as well as Electrical Works. Such works carried out before 01.06.2007 shall not be taxable following the ratio laid down by apex court in the cased of Commissioner of Central Excise & Customs, Kerala Vs Larsen & Toubro Ltd., reported in 2015 (39) S.T.R. 913 (S.C.). The dispute in the present appeal related to the period 310.09.2004 to 31.03.2006 on such count. Therefore there shall be no demand on such issue.
11. So far as Erection Charges is concerned, pertaining to the period 01.04.2008 to 33.03.2009, it may be stated that, that shall be liable to tax and what that is done by the learned adjudicating authority is proper. Learned counsel at this stage says that taxes having been paid that may be verified by Revenue and if there is any deficiency that shall be paid with interest. Such a proposition is fair. Revenue is to work out the demand aspect on this count and appropriate the tax already paid. Unpaid amount shall be realised with interest. Learned counsel prays that department should provide the details of payment and deficiency, if any for its Verification. No adverse view on such count shall be taken by the department since appellants approach appears to be fair on the issue.
12. The Infrastructure Charges paid to TNEB and incurred by the appellant directly as well as reimbursed to it, is not in relation to any services provided by the appellant to its clients. Therefore, in the absence of any taxing entry to tax such receipts the appellant is not liable to service tax thereon.
13. So far as Land Development Charges is concerned, factually it appears that these charges are for acquisition of land and re-transfer thereof. There is no material on record to show that whether any land development was made by the appellant on behalf of its client. Once such element is absent, the appellant cannot be brought to the taxing entry of Real Estate Developer. The transfer of property transactions are governed by Transfer of Property Act. Therefore, there shall be no liability for the period 10.09.2004 to 31.03.2009 on such count.
14. The Cenvat credit denied pertains to the input credit taken by the appellant for use thereof in manufacture of the generators. The generator not being liable to duty by virtue of exemption, appellant is liable to pay back entire credit taken to the State with interest. It is made clear that utilisation of the credit shall be calculated from the date of utilisation thereof and interest, if any, payable shall be calculated from that date till the period that was paid back to State. This we say following the judgment of the Honble High Court of Madras in Commissioner of Central Excise, Madurai Vs Strategic Engineering (P) Ltd. reported in 2014 (310) E.L.T.509 (Mad.).
15. It is apparent from record that the appellant had manufactured duty-free goods using duty paid input and Cenvat credit thereon was taken. No duty paid goods being manufactured using duty paid input but cenvat credit was claimed, utilisation thereof is contrary to law. Accordingly appellant is liable to penalty. However considering the facts and circumstances of the case, to reduce the dispute, it would be proper to direct the appellant to deposit 25% of the demand of duty on this count of ineligible credit issue pertaining to the period 01.10.2006 to 31.03.2008.
16. If any other penalty is levied on other four counts of demand, for no prejudice caused by appellant to Revenue, there shall not be penalty thereon.
17. It is expected that the consequence of this order shall be carried out by the adjudicating authority within a month hereof and appropriate demand, if any shall be raised and the dispute resolved.
18. In the result, appeal is partly allowed to the extent indicated above as well as partly remanded on account ineligible Cenvat credit as aforesaid.
(Dictated and pronounced in the open court)
(V. PADMANABHAN) (D.N. PANDA)
TECHNICAL MEMBER JUDICIAL MEMBER
ksr
13-05-2016
DRAFT
Remarks
I
II
III
Date of dictation
12.05.2016
Draft Order - Date of typing
13.05.2016
Fair Order Typing
13.05.2016
Date of number and date of dispatch
08.06.2016
8
E/1143/2004