Custom, Excise & Service Tax Tribunal
Samy Constructions vs Salem on 28 January, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT No. III
Service Tax Appeal No. 705 of 2012
(Arising out of Order-in-Original No. 06/2012 (ST) dated 30.10.2012 passed by
Commissioner of Central Excise, Salem)
M/s. Samy Construction, .... Appellant
2/1-52, Kunjandyur,
Gonur (Post)
Mettur Dam - 636 404.
VERSUS
The Commissioner of CGST & Central Excise ... Respondent
No.1, Foulkes Compound Anaimedu Salem - 636 001.
APPEARANCE :
Shri S. Venkatachalam, Advocate for the Appellant Ms. Anandalakshmi Ganeshram, Authorized Representative for the Respondent CORAM :
HON'BLE MR. P. DINESHA, MEMBER (JUDICIAL) HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) FINAL ORDER No.40131/2025 DATE OF HEARING: 18.10.2024 DATE OF DECISION: 28.01.2025 Per: Mr. P. Dinesha The appeal is filed by M/s. Samy Construction, Mettur Dam (hereinafter called as 'Appellant') against the Order-In-Original No. 06/2012 (ST) dt. 30.10.2012 passed by the Commissioner of Central Excise, Salem.2
2. Brief facts of the case are that the appellant is engaged in providing various services mainly to Government of India Undertakings, Municipality, Tamil Nadu Electricity Board and Corporates. It is the case of the department that the appellant did not pay proper service tax on various contracts and accordingly, service tax has been demanded with interest and penalty.
3. Shri. S. Venkatachalam, Ld. Advocate appeared for the appellant on behalf of Sri. S. Kannappan, Ld. Advocate and Smt. Anandalakshmi Ganeshram, Ld. Asst. Commissioner, appeared for the Revenue. 3.1. Ld. Advocate submitted that in the impugned order the learned Commissioner in the following paragraphs has indirectly admitted that there is no service tax liability on the appellant but confirmed the demand on the ground that the appellant produced only photo-copies of the documents which are not reliable and hence, demand proposed in the show cause notice came to be confirmed:
i. Para 38 of the impugned order - Salem Steel Plant (at pages 172-188 of the paper book) ii. Para 39 of the impugned order - Thermax Instrumentation Ltd. (at pages 99-137) 3 iii. Para 40 of the impugned order - BGR Energy System Ltd. (at pages 138-162) iv. Para 41 of the impugned order - Danieli India Ltd. - (at pages 163-171) 3.2. In respect of the above-mentioned contracts, the Service tax was demanded on the value of Gross amount shown in TDS Certificate and TDS amount was again included while arriving at the taxable value (Page 78 of the paper book). Further, the Gross amount shown in TDS certificate was inclusive of service Tax in terms of Section 67(2) of the Finance Act, 1994; the value of taxable service mentioned in the SCN to calculate service tax liability was different from the actual value, the appellant furnished photo copies of invoices issued by them which were not considered for the reason that the documents were only photo copies.
3.3.1 In respect of Mettur Municipality (paras 45 and
46) the appellant's claim was rejected on the ground that they did not submit supporting evidence which is factually incorrect. The appellants entered into contracts with Mettur Municipality for :
(a) Construction of Storm water Drain and small culvert
(b) Construction of Shopping Complex.4
The appellant claims that it is not liable to pay any Service Tax in respect of Construction of Storm water drain and small culvert in terms of Board's Clarification F. No. B2/8/2004 TRU dt. 10.09.2004. Work Order ROC No.4568/2004/E1 dt.10.02.2006 was for construction of Storm Water drain and small culvert to Thangamapuripattinam Main Road Ward-3 which is clearly mentioned in Para 45 of OIO. The Commissioner's contention that the appellant did not submit work order for the construction of culvert is thus baseless and unfounded. The work order is one of the relied upon documents as per para 09 (i) of SCN [internal pg. 11/ pg. 36 of Paper Book]. 3.3.2 Work Order ROC No.4568/2004/E1 dt.10.02.2006 is for Construction of Shopping Complex in Ward -D Block-6TSNo.71/1 under IDSMT Scheme Construction of Shopping Complex in Ward -D Block- 6TSNo.71/1 under IDSMT Scheme. The appellant paid Service Tax for the said contract after availing abatement under Notification 1/2006 dt. 01.03.2006. The abatement was denied on the ground that the appellant had not produced any evidence for the supply of free material. It was submitted that there was no free supply of material as is evident from the work order itself and, even if there was any free supply of materials, then the value of free supply material was not required to be included in the value, in 5 terms of the decision of Hon'ble Apex Court in the case of Commissioner of Service Tax vs Bhayana Builders (P) Ltd reported in 2018 (10) G.S.T.L. 118 (S.C.). 3.4. The appellant entered into contracts with TNEB for
(a) Construction of Toilets at TNEB office at Mettur.
(b) Construction of Security Protection wall (i) in and around LMHEP Barrage unit at Nerinjipettai, (ii) right side of Dam Power House, (iii) in and around of central stores and raising of compound wall of the central stores.
(c) Laying of underground power cable at Lower Mettur Hydro Electric Projects at Chekkanur Barrage, Nerinjipettai Barrage, and Kuthiraikkalmedu Barrage.
(d) Wiring and rewiring at quarters at town quarters and LMHEP quarters at Kuthiraikkalmedu.
(e) Providing WBM and Black topping over existing path in Thokkanampatti camp area and inside barrage-II at Nerinjipettai.
3.4.1. The work mentioned in (a) and (b) were claimed to be not taxable in view of Board's letter F. No. B2/8/2004-TRU dated 10.9.2004.
63.4.2. The work mentioned in (c) is not taxable service in view of Board's Circular No.123/5/2010-TRU dated 24.5.2010 in F.No.332/5/2010-TRU (para 3 of the circular page 14 of synopsis dt.24.03.2023) and Circular No.62/11/2003-ST- dated 21.8.2003 in F. No. B3/7/2003 -TRU. Laying of cables under or alongside roads is also claimed not taxable service under any clause of sub section (105) of Section 65 of the Finance Act,1994 as per para 1.2 of the circular.
3.4.3. The work mentioned in (d) is not taxable service in view of Board's Circular No. 62/11/2003- S.T., dated 21-8-2003 F. No. B3/7/2003-TRU. Reliance in this regard was placed on the order of co-ordinate bench in the case of Commissioner of Central Excise, Commissionerate Chandigarh vs Rajee Electrical Works reported in 2010(5) TMI 162.
3.4.4. The work mentioned in (e) is not a taxable service in view of the exclusion clause in Section 65(25b) of the Finance Act, 1994 and in terms of Para 2(i) of Board's Circular No.123/5/2010 TRU dated 24.05.2010 in F.No.332/5/2010-TRU.
3.5. The appellant appears to have entered into contracts with Hindustan Steel Construction Ltd, RPP Infra Projects Ltd and Metropolitan Equipments and Consultants 7 (P) Ltd as sub-contractor and completed the work. The appellant had not discharged service tax in respect of Hindustan Steel Works Construction Limited, RPP Infra Projects Ltd and Metropolitan Equipments and Consultants (P) Ltd. as according to them, the main contractor who had issued the work orders had taken up the responsibilities of discharging the service tax liability and had discharged the same; evidence to that effect in the form of their letters were also claimed to be made available before the AA.
3.5.1. The work orders issued by M/s. Hindustan Steel Works Construction Ltd. also contain a term under clause XXI that the main contractor would take up the responsibility of discharging service tax liability on the entire work. M/s. HSCL vide their letter dated 04.10.2012 intimated that they have paid the service tax on the contracts. M/s. HSCL is a Government of India undertaking and its bona fides cannot be questioned. 3.5.2. Metropolitan Equipments and Consultants (P) Ltd, Thane vide their letter dated 10.10.2012 intimated that they have paid the service tax on the contracts. 3.5.3. M/s. RPP Infra Projects Ltd vide their letter dated 06.10.2012 intimated them that they have paid the service tax on the contracts.
83.6. The Sub-Contractors are not liable to pay service tax when the Main Contractors paid the service tax. Following decisions are relied;
(i) Thadi Satya Ramalinga Reddy vs C.C.E., S.T. & CUS., Visakhapatnam-II reported in 2017 (4) G.S.T.L. 421 (Tri. - Hyd.,
(ii)JAC Air Services Pvt. LTD.vs Commissioner Of Service Tax, Delhi reported in 2013(31) S.T.R. (155) (Tri. Del) 3.7. It was contended that there are a plethora of decisions in favour of assesses at the relevant point of time and the issue of liability on sub-contractors went up to Larger Bench. The Department has proceeded to confirm the demand relying on certain later decisions; as the dispute was under litigation on this issue, invocation of extended period was not sustainable and as a sequel, imposition of penalty also unsustainable. Even for other issues extended period not invokable inasmuch as the entire demand made in the order are on technical issue of interpretation of Notifications, Circulars and Statutory provisions and hence, the extended period was not invokable. Reliance was placed on following decisions.
(i) M/s G R T Regency VS The Assistant Commissioner of Central Excise. [Order of Hon'ble High Court, Madurai Bench in W.P.(MD) No.14084 of 2017 and W.M.P (MD) No.11015 of 2017 dt. 11.10.2022];
(ii) Pramukh Earth Movers Vs Commissioner of Central Excise and Service Tax, [Final Order No.11699/2023 dt. 17.08.2023];
9
(iii) M/s. P.S. Construction VS Commissioner of Central Excise Panchkula, [Final Order No.30330/2024 dt. 25.06.2024];
(iv) M/s. Vinoth Shipping Services Vs Commr of C.EC.& S.T; Tirunelveli, 2021(55) GSTL 313(tri. Chennai dt.25.8.2021.
3.8. It was also pleaded that though the appellant paid a sum of Rs.39,18,496/-, only a sum of Rs.14,00,551/- was appropriated towards the demand and the balance amount of Rs.25,18,397/- was not taken into account without assigning any reasons. It was thus prayed to allow the appeal.
4. Per contra, Smt. Anandalakshmi Ganeshram relied on the findings of the Commissioner in the impugned order. She would also rely on the decision of Larger Bench of the Tribunal in Commr. of S.T., New Delhi Vs Melange Developers Private Limited - 2020 (33) G.S.T.L. 116 (Tri. - LB) on the issue of liability of sub- contractors and hence, the appellant was liable to pay service tax on sub-contracted work.
5. Heard both sides; we have carefully gone through the facts of the case and we note that service tax has been demanded in the impugned order on various contracts involved and hence, we need to analyse these contracts vis-à-vis department Circulars and case law 10 relied upon before us. We deem it appropriate to categorize issues involved in this appeal under 3 headings. i. Addition of TDS on the gross amount to arrive at the taxable value.
We find from Annexure-II attached to the show cause notice that in order to arrive at the taxable value, TDS amount is added to the Gross amount of the contract value, whereas in the Form 16A enclosed with the appeal we find that the TDS amount is deducted from the amount paid to the appellant and hence, the amount paid is itself the gross amount. Therefore, adding TDS amount once again has resulted in arriving at the inflated taxable value. TDS is always deducted from the amount payable and it is not any other consideration. Therefore, the demand on this score cannot sustain and hence, the impugned order to this extent is set aside.
ii. Service Tax demand on exempted services and denial of Abatement under Notification No.1/2006. 5.1 In the above category the contracts involved are:
Mettur Municipality and TNEB.
Insofar as Mettur Municipality is concerned, the appellant's claim was rejected for the reason that they did not submit 11 supporting evidence; against which the appellant claims to have submitted the details.
5.2 The Contracts with Mettur Municipality is for Construction of Storm water Drain and small culvert and Construction of Shopping Complex.
5.3 Work Order ROCNo.4568/2004/E1 dt.
10.02.2006 is for construction of Storm Water drain and small culvert to Thangamapuripattinam Main Road Ward-3 which is admitted in para 45 of the impugned order.
Construction of Storm water drain and small culvert is exempted in terms of Board's Clarification F. No. B2/8/2004 TRU dt.10.09.2004. Relevant para reads thus:
13.2 The leviability of service tax would depend primarily upon whether the building or civil structure is ‗used, or to be used' for commerce or industry. The information about this has to be gathered from the approved plan of the building or civil construction. Such constructions which are for the use of organizations or institutions being established solely for educational, religious, charitable, health, sanitation or philanthropic purposes and not for the purposes of profit are not taxable, being non-
commercial in nature. Generally, government buildings or civil constructions are used for residential, office purposes or for providing civic amenities. Thus, normally government constructions would not be taxable.
6. It is not disputed by the Revenue that the Work Order ROC No.4568/2004/E1 dt.10.02.2006 is for 12 Construction of Shopping Complex in Ward -D Block- 6TSNo.71/1 under IDSMT Scheme. The only dispute on this contract is denial of Abatement under Notification No.1/2006 dt.01.03.2006. The abatement is denied on the ground that the appellant had not produced any evidence for the supply of free material. Though the Revenue could not gather any evidence as to free supply of material, this issue is settled by the Hon'ble Apex Court judgment in the case of Commissioner of Service Tax vs Bhayana Builders (P) Ltd. [2018 (10) G.S.T.L. 118 (S.C.)] wherein, it was held that "A plain meaning of the expression ‗the gross amount charged by the service provider for such service provided or to be provided by him' would lead to the obvious conclusion that the value of goods/material that is provided by the service recipient free of charge is not to be included while arriving at the ‗gross amount' simply, because of the reason that no price is charged by the assessee/service provider from the service recipient in respect of such goods/materials‖.
7. The Contracts with TNEB are for Construction of
(a) Toilets at TNEB office
(b) Construction of Security Protection wall
(i) in and around LMHEP Barrage unit
(ii) right side of Dam Power House, 13
(iii) in and around of central stores and raising of compound wall of the central stores.
(c) Laying of underground power cable at Lower Mettur Hydro Electric Projects at Chekkanur Barrage, Nerinjipettai Barrage, and Kuthiraikkalmedu Barrage.
(d) Wiring and rewiring at quarters at town quarters and LMHEP quarters at Kuthiraikkalmedu; and
(e) Providing WBM and Black topping over existing path in Thokkanampatti camp area and inside barrage-II at Nerinjipettai
8. We find that Construction of (a) Toilets at TNEB office (b) Construction of Security Protection wall (i) in and around LMHEP Barrage unit (ii) right side of Dam Power House, (iii) in and around of central stores and raising of compound wall of the central stores are exempt in terms of Letter F. No. B2/8/2004 TRU dt.10.09.2004 which is extracted supra.
9. Similarly, Laying of underground power cable at Lower Mettur Hydro Electric Projects at Chekkanur Barrage, Nerinjipettai Barrage, and Kuthiraikkalmedu Barrage are exempt from tax in terms of Board's Clarification in C. No. 123/5/2010-TRU dt. 24.05.2010 (F. No. 332/5/2010 - TRU) and Circular 14 No. 62/11/2003 - ST - dated 21.8.2003 (F. No. B3/7/2003-TRU).
10. Relevant para 2(i) of Board's Circular No.123/5/2010 TRU dated 24.05.2010 in F.No.332/5/2010-TRU is reproduced below.
2(i) ‗Commercial or industrial construction services', in brief, cover construction of and the completion, finishing, repair, alteration, renovation, restoration or similar activities pertaining to buildings, civil structures, pipelines or conduits. Therefore, only such electrical works that are parts of (or which result in emergence of a fixture of) buildings, civil structures, pipelines or conduits, are covered under the definition of this taxable service. Further, such activities undertaken in respect of roads, railways, transport terminals, bridges, tunnels and dams are outside the scope of levy of service tax under this taxable service.
Wiring and rewiring at quarters/town quarters and LMHEP quarters at Kuthiraikkalmedu is also exempt from service tax vide Board's Circular No. 62/11/2003-S.T., dated 21-8-2003 F. No. B3/7/2003-TRU.
11. Also, the Hon'ble High Court in Commissioner of Central Excise, Commissionerate Chandigarh vs Rajee Electrical Works reported in 2010(5) TMI 162. held that- 15
―C.B.E. & C. Circular dated 21-8-2003 clarifying electrical wiring in residential premises not covered indicating non-taxability of incidental services - Laying pipe in wall/roof/floor or for crossing wires, fixing junction, fixing cable trays to lay cables, digging earth to lay cables and digging earth pits for earthing box not amounting to installation of plant, commissioning of machinery or equipment - Service tax not leviable - Section 65(39a) of Finance Act, 1994.‖ 11.1 Providing WBM and Black topping over existing path in Thokkanampatti camp area and inside barrage -II at Nerinjipettai is exempt from service tax as per Section 65(25b) of the Finance Act, 1994, in terms of Para 2(i) of Board's Circular No.123/5/2010 TRU dated 24.05.2010 in F.No.332/5/2010-TRU, which has been reproduced supra. Further, Notification No. 24/2009-S.T., dated 27-7-2009 exempts service tax on repair of roads.
Section 65(25b) of the Finance Act, 1994
(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, 16 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;
12. In view of the above discussions the demand made in the impugned order on this score also cannot sustain and hence, the impugned order to this extent stands set aside.
iii. Next issue under consideration is liability of sub-contractors.
13. In this case the appellant produced evidence in the form of letters from M/s. Hindustan Steel Works Construction Ltd, (Government of India undertaking) M/s. Metropolitan Equipments and consultants (P) Ltd and M/s. RPP Infra Projects Ltd which stated that main contractors have paid the service tax on the contracts including the amount paid to the appellant. M/s. Hindustan Steel Works Construction Ltd is a Government of India undertaking. The appellant contended demanding service tax again on the same taxable value amounts to double taxation. However, the Larger Bench in the case of COMMR. OF S.T., NEW DELHI vs MELANGE DEVELOPERS PRIVATE LIMITED - 2020 (33) G.S.T.L. 116 (Tri. - LB) held that: 17
'Every person (which would include a sub-contractor) providing taxable service to any person (which will include a main contractor) shall pay Service Tax at the rate specified in Section 66 in the manner provided for. The manner has been provided for in the Cenvat Credit Rules, 2004. ―Input Service‖ has been defined to mean, any service used by a provider of output service for providing an output service. ―Output Service‖ has been defined to mean any service provided by a provider of service located in the taxable territory. Rule 3 stipulates that a provider of output service shall be allowed Cenvat credit of the Service Tax leviable under Section 66, 66A and 67B of the Act. Thus, in the scheme of Service Tax, the concept of Cenvat credit enables every service provider in a supply chain to take input credit of the tax paid by him which can be utilized for the purpose of discharge of taxes on his output service. The conditions for allowing Cenvat credit have been provided for in Rule
4. The mechanism under the Cenvat Credit Rules also ensures that there is no scope for double taxation'.
14. In view of the Larger Bench's decision, we uphold the liability and the demand thereon. However, we find that on this issue, there are a number of decisions during the material time in favour of assesses and the issue was laid to rest, finally, by the Larger Bench. Therefore, it is held that suppression cannot be alleged and hence, consequent penalty is not imposable. We find that the reliance placed by the appellant on the following decisions/orders are apt:
Vinoth Shipping Services vs Commr. of C. Ex. & S.T.,
- 2021 (55) G.S.T.L. 313 (Tri. - Chennai) Pramukh Earth Movers Vs Commissioner Of Central Excise And Service Tax [Final Order No.11699/2023 dt. 17.08.2023] 18 Vishal Engineering Company Vs Commissioner Of Central Excise And Service Tax, Panchkula -M (2023) 9 Centax 154 (Tri.-Chan)
15. By following the ratio laid down in the various decisions cited supra, we hold that:
i. The demand of service tax confirmed in the impugned order except sub-contractors, are set aside;
ii. The demand of service tax on sub-contractors is sustained only for normal period and the other demand confirmed in the OIO by invoking extended period is set-
aside, iii. The matter is remanded for the limited purpose of determining of tax liability for the normal period, along with applicable interest, but however, there shall be no penalty on such determination of tax and interest.
(Order pronounced in open court on 28.01.2025) sd/- sd/-
(VASA SESHAGIRI RAO) (P.DINESHA) Member (Technical) Member (Judicial) vl