Custom, Excise & Service Tax Tribunal
Boominathan B vs Service Tax - Chennai on 26 May, 2023
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT NO. I
Service Tax Appeal No. 40033 of 2013
(Arising out of Order-in-Original No. 88/2012 dated 26.07.2012 passed by the
Commissioner of Service Tax, M.H.U. Complex, Nandanam, Chennai - 600 035)
M/s. B. Bhoominathan : Appellant
No. 1045, 19th Street, Anna Nagar,
Chennai - 600 040
VERSUS
The Commissioner of Service Tax : Respondent
No. 692, M.H.U. Complex, Nandanam, Chennai - 600 035 APPEARANCE:
Shri V. Vijay Anand, Chartered Accountant for the Appellant Smt. K. Komathi, Additional Commissioner for the Respondent CORAM:
HON'BLE MR. P. DINESHA, MEMBER (JUDICIAL) HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) FINAL ORDER NO. 40349 / 2023 DATE OF HEARING: 15.03.2023 DATE OF DECISION: 26.05.2023 Order : [Per Hon'ble Mr. Vasa Seshagiri Rao] M/s. B. Bhoominathan, Chennai, the appellant herein, is engaged in carrying out repairs of roads and related activities thereto.
2. Intelligence collected by the Survey, Intelligence and Research Branch (SIR) of the Service Tax Commissionerate, Chennai revealed that the appellant were providing taxable services of maintenance and repair of roads to various industrial units and also many 2 Appeal No.: ST/40033/2013-DB Government agencies without obtaining registration and without payment of Service Tax. Investigations carried out have indicated that M/s. B. Bhoominathan had carried out the following works from 2005-06 to 2008-09: -
(i) Five units in Mannur Village of Sriperumbudur Taluk viz., M/s. Myoung Shin India Automotive Private Limited, M/s. Global Stamping & Welding Automotive Private Limited, M/s. Daechang India Seat Company Private Limited, M/s. Daebu Automotive Seat India Private Limited and M/s. Dae Seung Autoparts India Private Limited had combinedly given a contract for road work i.e., laying of existing road, carrying out processes like picking the existing bituminous surface, providing and laying wet mix mancadam, prime coat, dense bituminous macadam and semi-dense bituminous concrete of required specifications for a total consideration of Rs.45,87,863/-.
(ii) Another agreement was entered into with M/s. Myoung Shin India Automotive Private Limited for "road work" for an amount of Rs.24,41,709/-.
(iii) Scrutiny of various documents such as Form-
16A (TDS Certificates) has indicated that the appellant had carried out various maintenance and repair activities of roads for the Divisional Engineer, Chennai City Roads, Divisional Engineer, Highways, Thiruvallur, Executive Officer, Puzhal Town Panchayat, Thiruvallur and for improving the existing road falling under the jurisdiction of Commissioner, Panchayat Union, Puzhal, for a total value of Rs.5,06,43,499/- for the year 2008-09, as per the table given below: -
3Appeal No.: ST/40033/2013-DB Sl. Nature Work done Total TDS on TDS on Total No. of for amt. paid IT VAT amt.
work (in Rs.) (in Rs.) (in Rs.) (in Rs.) 1 DE, Chennai 4331991 106529 94654 4533174 City Roads 2 DE, Highways, 29159177 666228 212615 30038020 Thiruvallur 3 EO, Puzhal 493367 91004 10920 595291 Town Panchayat, 4 Commissioner, 15277391 199623 0 15477014 Panchayat Puzhal Total 49261926 1063384 318189 50643499
(iv) The appellant has also carried out different works for Executive Engineer, PWD, Kosasthaliyar Basin Division, Thiruvallur, including special repairs to Weir and strengthening the tank, temporary restoration of rear slope of Surapet Bund of Redhills, etc., for a total value of Rs.60,02,824/-.
(v) Special repairs and de-silting of tanks for Assistant Executive Engineer, PWD, Araniar Basin Sub- Division, Ponneri was also undertaken by the apellant, the value of work being done at Rs.11,21,934/-.
(vi) The appellant has also undertaken the work of filling the low-lying area in eastern side of plot at Industrial Estate, Thirumullaivayal for Executive Engineer, SIDCO, the value of which worked out to Rs.60,57,610/-.
(vii) Also undertaken works such as construction of class room and lab toilet for Government Girls Higher Secondary School, Cholavaram for an amount of Rs.15,96,206/- and also works for the Programme Co-ordinator, Tsunami District Implementation, Thiruvallur for an amount of Rs.22,16,496/-.
4Appeal No.: ST/40033/2013-DB
3. Consequently, a Show Cause Notice C. No. IV/9/670/2009-STC Adj. dated 19.04.2010 was issued to the appellant proposing to demand a Service Tax of Rs. 1,97,85,209/- for the period from 16.06.2005 to 31.03.2009 under proviso to Section 73(1) of the Finance Act, 1994 along with interest at appropriate rate under Section 75 of the Finance Act, 1994 and also proposing imposition of penalties under Sections 76, 77 and 78 of the Finance Act, 1994 under the category of "maintenance or repair service" (MRS) under Section 65(64) of the Finance Act, 1994 read with Section 65(105)(zzg) of the Act and "site formation and clearance, excavation and earthmoving and demolition" (SFC) under Section 65(97a) of the Finance Act, 1994, read with Section 65(105)(zzza) of the Act, as per the table given below: -
Period Service Total Gross Cum-Tax Rate of Service Category Receipts Value Service Tax (in Rs.) (in Rs.) Tax (in Rs.) 2005-06 MRS 28563734 25919904 10.20% 2643830 2006-07 MRS 33993495 30286435 12.24% 3707060 2007-08 MRS 48389888 43066828 12.36% 5323060 2008-09 MRS 67612911 60175250 12.36% 7437661 2008-09 SFC 6123418 5449820 12.36% 673598 Total 184683446 164898237 19785209 4.1 After due process of law, the Commissioner of Service Tax, Chennai vide Order-in-Original No. 88/2012 dated 26.07.2012 has confirmed the demand of Service Tax of Rs.1,07,04,221/- under proviso to Section 73(1) of the Finance Act, 1994 along with interest under Section 75 of the Finance Act, 1994. Penalty of Rs.1,07,04,221/- was also imposed under Section 78 of the Act along with penalties under Sections 77(1)(a) for non-registration and also a penalty of Rs.5,000/- under Section 77(2) for failure to file ST-3 returns on the due dates.5
Appeal No.: ST/40033/2013-DB 4.2 The Commissioner has exempted the value of services for Rs.2,21,60,111/- for the period 2006-07 and Rs.6,05,83,339/- for the period 2008-09 as these services pertained to road works done for Government agencies such as Public Works Department (PWD), Highways, etc. The contention of the Department was that the activity of construction, re-laying and repair of roads carried out by the appellant to the private individuals, industrial units, commercial concern, etc., was liable to Service Tax.
4.3 Hire charges for JCB and Tipper for the years 2005-06 to 2007-08 were held exigible to Service Tax of Rs.81,93,138/- as the appellant had failed to produce any evidence that the hiring of JCB/Tipper was an independent activity separate from their main service of road maintenance. Accordingly, an amount of Rs.8,67,507/- was demanded from the appellant for the consideration received towards JCB/Tipper hire, as detailed in the table given below: -
Year JCB/Tipper Cum-tax Service Tax
charges value amount
received (in Rs.) (in Rs.)
(in Rs.)
2005-06 1794300 1628221 166079
2006-07 2592978 2310208 282770
2007-08 3805860 3387202 418658
Total 8193138 7325632 867507
4.4 Regarding the demand of Service Tax under "site
formation and clearance, excavation and earthmoving and demolition" for the work of site filling done by the appellant for SIDCO, the Adjudicating Authority, in the impugned order, has held Service Tax of Rs.6,73,598/- as payable.
4.5 The Commissioner, in the impugned order, has finally held Rs.1,07,04,221/- as demandable and so confirmed as per the table given below: -
6Appeal No.: ST/40033/2013-DB Sl. Period Gross Exempted Gross Taxable ST No value as value taxable value Payable per SCN (in Rs.) value (in Rs.) (in Rs.) (in Rs.) (Cum-
tax value) (in Rs.) 1 2005-06 28563734 28563734 25919904 2643830 2 2006-07 33993495 22160111 11833384 10542929 1290455 3 2007-08 48389888 48389888 43066828 5323060 4 2008-09 67612911 60583339 7029572 6256294 773278 5 2008-09 6123418 6123418 5449820 673598 Total 10704221
5.1 The Learned Consultant representing the appellant has submitted that they were registered with the Tamil Nadu Sales Tax Department under 'works contract' and they were providing works contract service whereas the tax was demanded under maintenance or repair service (MRS) / site formation and clearance, excavation and earthmoving and demolition service (SFC); the services in respect of the projects executed for the period prior to 01.06.2007 being in the nature of composite works contract, could not be brought within the fold of 'commercial or industrial construction service' up to 01.06.2007 in the light of the judgement rendered by the Hon'ble Apex Court in the case of Commissioner of C.Ex. & Cus., Kerala v. M/s. Larsen & Toubro Ltd. [2015 (39) S.T.R. 913 (S.C.)].
5.2.1 It was contended that the entire demand under maintenance or repair service of Rs.91,63,116/-, excluding JCB/Tipper hire charges, was not sustainable as it pertained to the period prior to July 2009, which was exempted by the insertion of Section 97 of the Finance Act, 2012 retrospectively for the period from 16.06.2005 to 26.07.2009, by relying on the decision in the case of 7 Appeal No.: ST/40033/2013-DB K.O. Periyakaruppan v. Union of India [2018 (16) G.S.T.L. 78 (Mad.)] wherein it was held that for the period from 16.06.2005 to 26.07.2009, maintenance and repair of road was exempted under Section 97 of the Finance Act, 2012 and also on the decision in Commissioner of Central Excise & Customs, Aurangabad v. M/s. Rajdeep Buildcon Pvt. Ltd. [2015 (38) S.T.R. 696 (Tri. - Mumbai)]. He has also placed reliance on the decision rendered by Regional Bench of the CESTAT at Hyderabad in the case of Commissioner of Customs, Central Excise and Service Tax, Hyderabad-II v. M/s. Larsen and Toubro Ltd. [2019 (24) G.S.T.L. 64 (Tri. - Hyderabad)].
5.3 On the issue of demand on JCB and Tipper hire charges, the Learned Consultant has contended that the Service Tax is leviable with effect from 16.05.2008 consequent to the introduction of "supply of tangible goods" service; any demand pertaining to the prior period on JCB and Tipper hire charges under maintenance and repair service is not maintainable as 'supply of tangible goods', a separate service, was introduced with effect from 16.05.2008 and that the entire demand was pertaining to the prior period, and as such demand of Rs.8,67,507/- is required to be set aside.
5.4.1 Regarding the demand of Service Tax on "site formation and clearance, excavation and earthmoving and demolition" (SFC), it is contended that the appellant's activity of site formation is part of the repairs and maintenance activity of road and was required to be classified under maintenance or repair service and hence, the impugned order confirming the demand without looking into the purpose and significance of the main activity is unsustainable.
5.4.2 In support of this contention, reliance has been placed on the decision rendered by the Hon'ble High Court of Punjab and Haryana in the case of Commissioner of Central Excise, Ludhiana v. Dr. Lal Path Lab (P) Ltd. [2007 8 Appeal No.: ST/40033/2013-DB (8) S.T.R. 337 (P&H)] wherein it was held that when there is an exclusion provided in the provision in respect of a particular service, then merely because an incidental service is provided, it would not make such service taxable under another category of service.
6.1 Learned Authorized Representative Smt. K. Komathi (Addl. Commissioner) appearing for the Revenue has reiterated the findings of the Commissioner in the impugned order date 26.07.2012. She has contended that the service of maintenance or repair of roads provided to the private / industrial units are chargeable to Service Tax.
6.2 She has further submitted that JCB and Tipper hire charges are exigible to Service Tax as the appellant has accounted for these charges separately in their financial statements.
6.3 Regarding 'site formation and clearance, excavation and earthmoving and demolition' service, it is submitted by the Learned Authorized Representative for the Revenue that the Service Tax demanded needs to be sustained.
7. We have heard both the sides and considered all the submissions made by both the parties and records as available in this appeal. The issues that arise for consideration in this appeal are: -
(1) Whether the demand of Service Tax raised for the services provided by the appellant is justified under the category of 'management, maintenance or repair' service?
(2) Whether the demand under the category of 'site formation and clearance, excavation and earthmoving and demolition' service is justified? and (3) Whether extended period for demand of tax and for imposition of penalty is invocable or not in the facts of this case?9
Appeal No.: ST/40033/2013-DB
8. We find that the Commissioner of Service Tax, Chennai has exempted all the Services provided in relation to repair of roads carried out for various Government Departments and local authorities, but relying on the decision of the Tribunal in the case of M/s. Larsen & Toubro Ltd. v. Commissioner of Central Excise, Hyderabad [2010 (20) S.T.R. 113 (Tri. - Hyderabad)], it has been held that exemption from payment of Service Tax under maintenance or repair service (MRS) is available only for repair / re-laying of public roads and infrastructure facilities are "public goods" and only infrastructure items of public utility or civic amenity are covered under the excluded category.
9.1 We find that vide Notification bearing No. 25/2012- S.T. dated 20.06.2012, the Government has exempted certain taxable services as listed at Sl. 13 of the said Notification, as given below: -
"13. Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of, -
(a) a road, bridge, tunnel, or terminal for road transportation for use by general public;
(b) a civil structure or any other original
works pertaining to a scheme under
Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awaas Yojana;
(c) a building owned by an entity registered under Section 12AA of the Income Tax Act, 1961 (43 of 1961) and meant predominantly for religious use by general public;
(d) a pollution control or effluent treatment plant, except located as a part of a factory; or 10 Appeal No.: ST/40033/2013-DB a structure meant for funeral, burial or cremation of deceased."
9.2 The question as to whether the above Notification would have a retrospective effect for the period from 2005 to 2009 was also answered by the Notification No. 24/2009-S.T. dated 27.07.2009 which was issued under Section 93 of the Finance Act. The special provision for exemption in certain cases relating to Service Tax on repair of roads was made in Section 97 of the Finance Act, 2012. Notification No. 24/2009-S.T. states that the exemption has been extended even for the earlier period from 16.06.2005 to 26.07.2009. The said Notification reads as under:-
" New Delhi, the 27th July, 2009.
Notification No. 24/2009-Service Tax G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service, referred to in sub-clause (zzg) of clause (105) of section 65 of the Finance Act,1994, provided to any person by any other person in relation to management, maintenance or repair of roads, from the whole of the service tax leviable thereon under section 66 of the said Finance Act."
9.3.1 We find that the Mumbai Bench of the CESTAT in the case of Commissioner of Central Excise & Customs, Aurangabad v. M/s. Rajdeep Buildcon Pvt. Ltd. [2015 (38) S.T.R. 696 (Tri. - Mumbai)] has held as under: -
11Appeal No.: ST/40033/2013-DB "5. As regards the Service Tax liability under the category of 'management, maintenance and repair service', we find that the said services were rendered by the appellant to National Highways Authority of India for the maintenance or repairs of the roads. We find that the issue is no more res integra inasmuch as vide Finance Act of 2012, retrospective exemption was granted under Section 97 and Section 98. We reproduce the same as under :
"SECTION 97. Special provision for exemption in certain cases relating to management, etc., of roads. - (1) Notwithstanding anything contained in Section 66, no Service Tax shall be levied or collected in respect of management, maintenance or repair of roads, during the period on and from the 16th day of June, 2005 to the 26th day of July, 2009 (both days inclusive).
(2) Refund shall be made of all such Service Tax which has been collected but which would not have been so collected had sub-section (1) been in force at all material times.
(3) Notwithstanding anything contained in this Chapter, an application for the claim of refund of Service Tax shall be made within a period of six months from the date on which the Finance Bill, 2012 receives the assent of the President."
9.3.2 Further, the Hyderabad Bench of the Tribunal in the case of Commissioner of Customs, Central Excise and Service Tax, Hyderabad-II v. M/s. Larsen and Toubro Ltd. [2019 (24) G.S.T.L. 64 (Tri. - Hyderabad)] has observed as under: -
"G.5 The Appellant places reliance on the decision of the Hon'ble Tribunal in CST, Ahmedabad v. Shilpa Constructions Pvt. Ltd. reported at 2010 (19) S.T.R. 830 (Tri.-Ahmd.) (page 308-310 of the Compilation) wherein the respondents constructed a driveway in a petrol pump 12 Appeal No.: ST/40033/2013-DB and paid service tax on the same. Subsequently, they filed an application for refund on the grounds that they had paid it wrongly for the construction of road which is exclude from the category of "Commercial and Industrial Construction" as defined under clause (25b) of the Section 65 of the Finance Act, 1994. While allowing the said exclusion to them, the Hon'ble CESTAT observed as follows :
"7. After carefully considering the submissions made by both the sides we find that it is an admitted fact by both the sides that the construction of road does not require payment of service tax. The Revenue's only appeal is that construction of driveway cannot be equated with the construction of road inasmuch as such driveway was not for public utility purpose but the same was in connection with the petrol pump owned by the owner.
In this connection we find that the Board's Circular No. B1/6/2005-TRU, dated 27-7-2005 is to the effect that - "if the contract for construction of commercial complex is a single contract and the construction of road is not recognized as a separate activity as per the contract, then the service tax would be leviable on the gross amount charged for construction including the value of construction of road". As such it becomes clear that the value of construction of road is to be included in the value of the service only when there is no segregation between the construction of commercial complex and construction of the road. If the contract recognizes the two activities as separate activities, even though the construction of the road is in connection with the commercial complex, the benefit has to be allowed. As such the fact whether the road is being constructed for public utility purpose or as a part of a commercial complex is not relevant, in terms of the Board's Circular above. Accordingly we do not find any infirmity in the view adopted by 13 Appeal No.: ST/40033/2013-DB Commissioner (Appeals), inasmuch as the contract in the present appeal is admittedly for construction of road only."
(Emphasis supplied) 9.4 In the light of the above, we hold that the demand pertaining to maintenance and repair service in respect of roads is not sustainable in view of the exemption under Section 97 of the Finance Act, which has retrospective effect for the period from 16.06.2005 to 26.07.2009. For according exemption, no distinction needs to be made between private and public roads.
10.1.1 On the issue of demandability of Service Tax for the consideration received towards hiring of JCB and Tipper, we find that "supply of tangible goods" under Section 65(105)(zzzzj) of the Finance Act, as a separate category, came into effect from 16.05.2008 whereas the demand was raised under maintenance or repair service against the appellant for the period from 2005-06 to 2007-08.
10.1.2 In this connection, it is relevant now to refer to the provisions of Section 65A on the classification of service, which read as given below: -
"Section 65A. Classification of taxable services. -
(1) For the purposes of this chapter, classification of taxable services shall be determined according to the terms of the sub-clauses (105) of section 65;
(2) When for any reason, a taxable service is prima facie, classifiable under two or more sub-clauses of clause (105) of section 65, classification shall be effected as follows :-
(a) the sub-clause which provides the most specific description shall be preferred to sub-
clauses providing a more general description;
(b) composite services consisting of a combination of different services which cannot be 14 Appeal No.: ST/40033/2013-DB classified in the manner specified in clause (a), shall be classified as if they consisted of a service which gives them their essential character, in so far as this criterion is applicable;
(c) when a service cannot be classified in the manner specified in clause (a) or clause (b), it shall be classified under the sub-clause which occurs first among the sub-clauses which equally merits consideration;
(3) The provisions of this section shall not apply with effect from such date as the Central Government may, by notification, appoint."
10.2.1 Even if it is assumed that the hire charges on account of JCB and Tippers are separately accounted for in the financial statements of the appellant, the demand is not sustainable as the services were provided prior to the introduction of "supply of tangible goods" as a separate category under Section 65(105)(zzzzj).
10.2.2 We find that the above demand was raised in this appeal under maintenance or repair service as these were reportedly hired to those customers / service providers for repair / maintenance of the roads. However, the main service of these agreements / contracts is maintenance or repair service of roads, which itself was exempted with retrospective effect from 2005 to 2009. As such, we hold that the demand of Service Tax on hiring of JCBs, Tippers, etc., is not maintainable.
11. As there was considerable confusion during the said period relating to the taxability under maintenance or repair service in respect of roads for infrastructure projects, we find that invoking the extended period is not justified. So, we set aside the penalties imposed under Sections 77 and 78 of the Finance Act, 1994.
15Appeal No.: ST/40033/2013-DB 12.1 We find that the appellant has provided services relating to filling up of low-lying area in industrial plot located in SIDCO for a total work value of Rs.60,57,610/-, which is classifiable under "site formation and clearance, excavation and earthmoving and demolition" service as defined in clause (97a) of Section 65 of the Finance Act, 1994. Recording the cum-tax benefit, the Service Tax payable was quantified as Rs.6,73,598/-. (paragraph 4.5 above) 12.2 We find from the records that the demand is raised in respect of site formation and clearance, excavation and earthmoving and demolition service on the basis of TDS Certificate issued by the Executive Engineer, SIDCO wherein it was mentioned that the assessee undertook filling-up of the low-lying area in eastern side of SIDCO Industrial Estate. The assessee's contention that the site formation service has been undertaken in connection with any laying or repair of road is not acceptable in the absence of any evidence. Even during the hearing before us, the appellant has never produced any evidence relating to the above activity.
12.3 For the above reasons, we uphold the finding of the lower authority that the activity undertaken by the appellant squarely falls under the scope of site formation and clearance, excavation and earthmoving and demolition under Section 65(97a) of the Finance Act, 1994 and we hold that the assessee is liable to pay Service Tax of Rs.6,73,598/-, as confirmed by the learned Adjudicating Authority along with penalty under Section 78 of the Finance Act, 1994.
12.4 From the order of the lower authority, we also find that the material facts were unearthed by the Department and hence, non-furnishing of any facts would clearly amount to suppression of acts with an intention to evade tax within the meaning of Section 73(1) ibid. Hence, the Revenue is justified in invoking the larger period of 16 Appeal No.: ST/40033/2013-DB limitation for this activity. So, the demand and penalty in respect of this activity are, therefore, required to be sustained.
13. In view of the above discussion, the demand and penalty insofar as it relates to the maintenance or repair service undertaken by the appellant are set aside. However, the demand and penalty in respect of site formation and clearance, excavation and earthmoving and demolition service are sustained.
14. The appeal is thus partly allowed, as indicated above.
(Order pronounced in the open court on 26.05.2023) Sd/- Sd/-
(VASA SESHAGIRI RAO) (P. DINESHA) MEMBER (TECHNICAL) MEMBER (JUDICIAL) Sdd