Custom, Excise & Service Tax Tribunal
M/S. The Indian Hume Pipe Co. Ltd vs Cce, Trichy on 1 October, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH AT CHENNAI ST/623/2011 (Arising out of Order-in-Appeal 180/2010 dated 18.10.2010, passed by the Commissioner of Central Excise (Appeals), Trichy). M/s. The Indian Hume Pipe Co. Ltd. : Appellant Vs. CCE, Trichy : Respondent
Appearance Shri K.S. Venkatagiri, Adv., For the appellant Shri B.Balamurugan, AC (AR) For the respondent CORAM Honble Shri R. PERIASAMI, Technical Member Honble Shri P.K. CHOUDHARY, Judicial Member FINAL ORDER No. 41792 / 2015 Date of Hearing/Decision: 01.10.2015 Per: P.K. Choudhary The appellant filed this appeal against the Order of the Commissioner (Appeals) dated 18.10.2010. They are registered with the central excise for manufacturing of PSC pipes under Chapter sub-heading 6807.90 of CETA and supplying the pipes for TWAD and various other contractors. The adjudicating authority confirmed the demand of service tax of Rs. 1,50,000/- under works contract service and imposed equal penalty under Section 78 of the FA, 1994 and also imposed penalties under Section 76 and 77 of the FA, 1994. On appeal, the Commissioner (Appeals) upheld the impugned order in so far as the demand and Section 77 and 78 penalty is concerned and waived the penalty under Section 76 of the Act. On appeal before this Tribunal, vide Tribunals Final Order No. 40386/2013 dated 22.07.2013 dismissed the condonation of delay application and consequently the appeal along with stay application is also dismissed. The appellant preferred CMA before the Honble High Court of Madras and the Honble High Court in their Order dated 24.04.2015 in CMA No. N. 181/2015 & M.P.No. 1/2015, set aside the Tribunals Order and condoned the delay subject to payment of Rs.5,000/- to the Chief Justice Relief Fund and directed the Tribunal to take up the appeal and decide the same on merits. In view of the Order of the Honble High Court of Madras, the appeal is restored to its original number and the stay application is taken up for hearing.
2. The Ld. Counsel for the appellants company Shri K.S. Venkatagiri, Advocate, submitted that the issue in the present appeal relates to demand of service tax on works contract service of construction of pipeline and other structures for providing water supply for Tamil Nadu Water Supply and Drainage Board, in the Ananthapuram Town Panchayat of Villupuram. The services were provided during the period 1.10.2007 to 31.3.2009. As per the Order-in-Original and OIA, the services would fall under the works contract service and as such is liable to service tax. He further submitted that the services were excluded from the scope of the levy, as it was for construction of a pipeline for water supply by the TWAD Board and not primarily intended for commerce or industry. The definition of works contract, as per sub clause (zzzza) (ii)(b) refers. As per the Order-in-Original the services would be under the services of erection, commissioning and installation services with thrust on drain laying or other installations for the transport of fluids, as per sub clause (ii)(a) of the Explanation and it rejected the submission of the appellant that the provision of water supply by Municipal Corporation or Panchayat, could not be considered for the purpose of commerce or industry. He further submitted that they have already paid the demand and penalties arising out of the Order in Appeal dated 18.10.10, and submitted copies of TR-6 challans in proof of payment. He further submits that they made the payment under protest. He also submits that their case is covered by the Larger Bench decision of the Tribunal in the case of M/s. Lanco Infratech Ltd. & Others Vs. CCE & ST, Hyderabad reported in 2015-TIOL-768-CESTAT-BANG-LB and prays that the appeal itself may be disposed of.
3. The Ld. AR Shri B. Balamurugan, AC, reiterated the findings of the OIO and OIA.
4. Heard both sides. In a rejoinder, the Ld. Advocate further submitted that the issue is no longer res integra and stated that prior to the levy of service tax on works contract services, demand was raised on the appellant for the identical services rendered under Commissioning or Installation Service. The Appellant appealed against the demand and the Honble CESTAT held that the services are not liable to tax under Commissioning or Installation Service vide decision in Indian Hume Pipes Co. Ltd., Vs., Commissioner of Central Excise, Cochin, 2008-TIOL-1665-CESTAT-MAD. Copy of the order is at Annexure E (Page 36) of the Appeal book. The order also holds that a water supply project being an infrastructure facility and not primarily for commerce or industry. He further submitted that for the period after 1.6.2007 under works contract the L.B.decision holds that no tax leviable. He placed a copy of the order of the Honble High Court of Madras in their own case, where the Revenue had preferred appeal against the above mentioned order of the CESTAT and the same has been dismissed by the Honble High Court in C.M.A. No. 1140/2009 and M.P. No. 1/2009 reported in 2015-TIOL-2049-HC-Mad (ST).
5. He further submitted that as regards the question of levy of service tax after introduction of works contract service, the Larger Bench of the Honble CESTAT in the case of Lanco Infratech Ltd., and others Vs., Commissioner of Central Excise, Hyderabad (2015-TIOL-768-Cestat-Bang-LB), held that the service relating to construction/laying of pipelines for transmission of water for municipal supply would not amount to erection, commissioning and installation service. The finding of the Cestat in the earlier case was reiterated and applied to Works Contract Service also. The Larger Bench held that the construction of pipelines for rift irrigation, water supply etc., would stand excluded from the levy, even under the works contract service. The Larger Bench also referred to CEBEC Circular No.123/5/2010-TRU, dated 24.5.2010. According to the decision, even after introduction of works contract, the services would fall under sub clause (ii) (b) of the explanation to Works Contract and consequently held that the services of construction of pipeline is meant for water supply Corporation or Municipality, not being primarily for commerce or industry, no service tax would be leviable. Based on the decision of the Larger bench which is binding, the Ld. Counsel pleaded that the appeal may be allowed.
6. We have carefully considered the submissions of both sides and perused the records. On perusal of the grounds of appeal we find that the period involved in the subject appeal is from 01.10.2007 to 31.03.2009. The issue involved is whether for the services provided during this period the appellants are liable to pay service tax under the Works Contract Service, which was introduced into the statute from 01.06.2007. It is noticed that prior to this period for identical services the Honble tribunal have held that laying of pipelines would not come under the scope of erection and commissioning and installation service based upon the then prevailing definition of the same service. In the instant case, the Commissioner (Appeals) has recorded his findings in para 4.1 of the impugned Order in Appeal wherein he has observed that the service of laying the pipelines would come under the scope of Works Contract Service from 01.06.2007.
7. On perusal of the definition of erection, commissioning and installation service prior to 01.06.2007 and the definition of Works Contract Service, it is possible to hold that there may be distinction between the definitions of the two services but yet it cannot be ruled out that the interpretation of law is involved. However, we find that the issue emanated for classification of service immediately after the introduction of the Works Contract Service from 01.06.2007. Though the Commissioner (Appeals) had held that the service would come under Works Contract Service, yet he has not spelt out as to why the same service is distinguishable from the erection, commissioning service under which identical services of the same appellant were classified. Even though there maybe transfer of property involved, yet it would be reasonable for the appellants to contend that there is no erection, commissioning or installation of any of the items specified in the Works Contract Service.
8. Without going into the merits of the case, we are of the view that there was sufficient scope for the appellants to come into a bonafide belief that even during the said period, in absence of clear definition of the Works Contract Service to cover the specific service provided by them, no service tax was payable as the decision of the tribunal in their own case reported in 2008(12) STR 363 was in favour of them. Though this decision pertained to the period prior to 01.06.2007. We also noticed that the appellant had been informing the department of the contracts that they have entered into with various customers. The period involved being immediately after the introduction of Works Contract Service, clarity was required as to whether what was not covered under the erection, commissioning and installation service earlier, could be covered under the new service. Since, in the instant case the issue appears to be latent to the interpretation of law at the initial stage of introducing due service, there was scope of bonafide belief that the appellants did not have to pay tax. Therefore, viewing from this angle, the non obtaining of service tax registration and non payment of tax could be due to the bonafide belief that no tax was payable even under Works Contract Service. Consequently, the appellants contention that no returns were filed could also be due to such bonafide belief. We do not find that failure of their part in obtaining registration and non payment of tax could be attributed to deliberate suppression of facts and intention to evade tax.
9. Without going into the merits of the case, we hold that the invoking of the longer period of time limit is not justifiable in the instant case, as Sec 80 of the Finance Act, as it existed during the relevant time, would come to the appellants rescue so far as invoking of the extended period of time limit is concerned. In this connection, the judgments of the Supreme Court in the following cases are relevant.
i) Padmini Products v/s CCE - 1989 (43) ELT 195
ii) CCE, Pondicherry v/s. Honda Siel Power Products Ltd.
2015 (323) E.L.T. 644 (S.C.) The ratio of the above decision squarely applicable to the present case. Accordingly, we set aside the impugned order on limitation and allow the appeal with consequential relief.
(Operative part of the Order pronounced in the open Court)
(P.K. CHOUDHARY) (R. PERIASAMI)
JUDICIAL MEMBER TECHNICAL MEMBER
BB
1