Custom, Excise & Service Tax Tribunal
Tpg Construction Service vs Delhi - I on 10 July, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi - 110 066.
Principal Bench, New Delhi
COURT NO. I
DATE OF HEARING : 10/07/2018.
DATE OF DECISION : 10/07/2018.
Service Tax Appeal No. 51566 of 2015
[Arising out of the Order-in-Original No. 04/AKJ/ST-I/2014 dated
09/01/2015 passed by The Chief Commissioner, Service Tax
Commissionerate, Delhi, New Delhi.]
M/s TPG Construction Ltd. Appellant
Versus
CST, Delhi - I Respondent
Appearance
Shri B.K. Singh, Advocate - for the appellant
Shri V. Pandey, Authorized Representative (DR) - for the
Respondent.
CORAM: Hon‟ble Shri Anil Choudhary, Member (Judicial)
Hon‟ble Shri C.L. Mahar, Member (Technical)
Final Order No. 52766/2018 Dated : 10/07/2018
Per. C.L. Mahar :-
The brief facts of the matter are that the appellant have
been working as sub-contractors for Larsen & Toubro Ltd. in
respect of construction activities undertaken on behalf of M/s
Larsen & Toubro. The Department has undertaken an audit of the
books of account of M/s Larsen & Toubro Ltd. and during the
2 ST/51566 of 2015
audit it has transpired to the Department that the appellant have
been providing services under the category of commercial or
industrial construction services as per Section 65 (105) (zzq) and
work contract services as per the provisions of Section 65 (105)
(zzzza) of the Finance Act, 1994. It has been the case of the
Department that the appellant have been providing services
under the above-mentioned two categories to the service
recipient namely M/s Larsen & Toubro and others and they have
neither taken registration under above-mentioned services nor
have paid any service tax. The Department following the best
judgment method, has demanded a service tax of Rs.
82,48,538/- under Section 73 of the Finance Act, 1994, penalty
provisions under Section 76, 77 and 78 of the Finance Act has
also been invoked in the show cause notice covering the period
2007-2008 to 2011-2012. The show cause notice has been
adjudicated by the impugned order dated 09/01/2015 wherein
the learned Commissioner has confirmed all the charges invoked
in the show cause notice. The learned Commissioner has
confirmed the service tax under the category of commercial or
industrial construction service and works contract service.
2. The learned Advocate appearing for the appellant has
contended that (i) the appellant is working as a sub-contractor
not only for M/s Larsen & Toubro Ltd. but to various other
construction companies which are engaged in the construction of
road projects (ii) that all the receipts which are being taken by
the Department from the financial year 2007-2008 to 2011-2012
3 ST/51566 of 2015
are pertaining to the work relating to construction of road and
highway projects. It has further been argued that so far as the
work of construction of the road and other activities related to
construction of road are concerned, same are exempted under
both the categories of service tax namely commercial and
industrial construction and work contract service by virtue of the
definition of the both the services given under Section 65 (105)
of Finance Act, 1994. During the course of arguments, the
learned Advocate has taken us through various contracts which
has been adjudicated by them during the demand period and the
basic nature of the work as comes out from these contracts are
summarized here below :-
"(a) the Work Order No. 100109 dated 15/04/2006
for the period from 15/04/2006 to 25/07/2008
entered with the main contractors M/s L&T Ltd., specifies
that the appellant was required to undertake following
works in relation to the construction of road and
bridge/widening of existing road :-
i. „Embankment and Subgrade Excavation of fill-
material at borrow area and
ii. Transportation of the filling material up to
filling - location
iii. The filling material namely excavated soil taken
out from the borrow land is filled and leveled
with rollers to compact it and form
embankment‟
(b) Similarly the letter of intent (LOi) ref. PNP/OTH/2007/
693 dated 31/07/2007, issued by M/s L&T Ltd. in favour of
the appellant, is for the project of widening of existing
4 lane portion on NH-1 near Panipat, Haryana, to 6
lanes and construction of 6 lane elevated structure on BOT
4 ST/51566 of 2015
basis for NHAI. The letter of intent is issued for
"Transportation of BDM/BC mix materials from contractor‟s
plant to work site area, using appellant‟s dumpers.
(c) The Work Order dated 31/07/2007 of M/s
IRCON International Ltd. New Delhi issued in favour of
the appellant is again for construction of Road in
connection with 6 laning of a section of NH-1 near
Panipat. The scope of work under the said work order was
as below :-
(i) Cleaning and grubbing for road land
(ii) Dismantling/disposal of unserviceable
material
(iii) Earthwork in excavation necessary for
construction of roadways,
(iv) Construction of embankment, drainage
excavation,
(v) Construction of subgrade and earthen
shoulder with material from borrow
area,
(vi) Loosening and re-compacting sub-grade
in all kind of soil
(d) Similarly, the Work Order dated 01/01/2007 of
M/s Garg Construction Co. Ludhiana, issued in favour of the
appellant is for the construction of Road for Ludiana-
Phagwara Road Project, involving complete earthwork
The scope of work under the said work order was as below
:-
"earthwork complete including excavation,
transportation, grading, watering and
compaction work as per specification"
(e) Another Work Order of M/s BSC - C&C JV dated
21/01/2008, issued in favour of the appellant was again
for construction of Road in relation to Kurali to
Kiratpur BOT project. The scope of work under the said
order was as below :-
5 ST/51566 of 2015
"(i) cleaning and grubbing including removing
of stumps and refilling,
(ii) Providing laying and compacting
earthwork in embankment/sub-grade for road,
(iii) Providing laying and compacting Granular
Sub-Base (GSB) for road, and
(iv) Providing, laying and compacting Wet Mix
Mecadam (WMM)
(v) Another Work Order of M/s Shiv Shakti
Construction dated 03/01/2009, was again
issued in favour of the appellant for construction
of Road in relation to Rohtak - Hisar project of
NH-10. The scope of work under the said work order
was as below :-
"earth excavation, transportation,
watering, laying and compaction work
complete for the Rohtak - Hisar project of
NH-10".
(vi) The Work Orders of M/s J.S.P. Ghaziabad,
dated 31/07/2008 and of M/s Woodhill infrastructure
Ltd. Ghaziabad dated 15/11/2008, were for
construction in relation to Yamuna Expressway
Project. The scope of work under the said work
order was "earth work upto embankment level"
(vii) The Work Order dated 10/06/2009 of M/s
Shivalaya Construction Co. Pvt. Ltd., was for
construction in relation to Rohtak - Jahjjar
Project Haryana. The scope of work under the said
work order was "complete earth work for Haryana
State Road Project"
6 ST/51566 of 2015
(viii) The Work Orders dated 20/12/2009,
02/03/2010, and 28/03/2010 of M/s Balajee
Infratech and Constructions Pvt. Ltd. Mumbai, were
for construction in relation to Yamuna
Expressway Road Project. The scope of work
under the said work orders was "construction of
earthen Subgrade which included excavation in
soil, loading, transportation, dumping, grading
and compaction, complete work".
(ix) The Work Orders dated 30/07/2008, of
M/s Unity Infra Projects Ltd. were for widening of
Rai-Nahara-Bahadurgarh Road Project. The
scope of work under the said work orders was as
under :-
(i) Dismantling including disposal of
unserviceable material
(ii) Scarifying the existing bituminous
road surface and disposal of scarified
material
(iii) Excavation in all types of soil in roadway,
road shoulders, verge, for widening of
carriage way/pavements
(iv) Earth work in excavation for
foundation of structures in all types
of soil
(v) Excavation and embankment in
layers
(vi) Construction of embankment
(vii) Loosening of the ground upto level of 500
mm below the subgrade level
(viii) Construction of granular sub-base
(GSB grade)
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(ix) Transportation, laying, spreading and
compacting graded stone aggregate
to wet mix macadam, laying in uniform
layer with paver in sub base/base course
..
(x) Providing and applying primer coat with bitumen emulsion on prepared surface of granular base including cleaning of road surface ..
(xi) Providing and laying bitumen emulsion for sealing cracks
(xii) Providing and laying slurry seal on a road surface, and compacting to provide even riding surface
(xiii) Transportation and laying of mixed bituminous macadam mix, rolling and compacting
(xiv) Transportation and laying of mixed dense graded bituminous macadam, rolling and compacting
(xv) Transportation and laying of mixed bituminous concrete mixed with bituminous binder, rolling and compaction.
1.5 Thus on the basis of above contracts the learned Advocate has concluded only that the appellant was rendering construction service as a sub-contractor in relation to the national highways or expressways for the use of general public.
3. It has further been argued by the learned Advocate that the Adjudicating Authority himself is not very clear whether he wants to classify the above activities of the appellant under the category of commercial or industrial construction or under the 8 ST/51566 of 2015 work contract service because the service tax demand has been confirmed under both the categories of services. The learned Advocate has also taken us through the definitions given under both the categories of service namely commercial or industrial construction as well as work contract service. The text of the contents are reproduced below :-
"1.9 The „Commercial or Industrial Construction‟ under Section 65 (25b) of the Finance Act 1994 is defined as below :-
"(25b) "commercial or industrial construction service"
means -
(i) construction of a new building or a civil structure or a part thereof; or
(ii) construction of pipeline or conduit; or
(c) completion and finishing services such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services, in relation to building or civil structure; or
(a) repair, alteration, renovation or restoration of, or similar services in relation to, building or civil structure, pipeline or conduit, which is -
(a) used, or to be used, primarily for; or
(b) occupied, or to be occupied, primarily with; or
(c) engaged, or to be engaged, primarily in, 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;"
9 ST/51566 of 2015 1.10 It is very clear from the exclusion clause viz., but does not include such services provided in respect of roads...‟ that the service provided in respect of roads is not taxable under Section 65 (25b) of the Act. 1.11 Similarly the „Work Contract Service‟ under Section 65 (105) (zzzza) of the Act ibid reads as under :-
Section 65 (105) "taxable service" means any service provided or to be provided - (zzzza) to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams.
Explanation. - For the purposes of this sub-clause, "works contract" means a contract wherein, -
(1) transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and
(ii) such contract is for the purposes of carrying out,
(a) erection, commissioning or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise, installation of electrical and electronic devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape staircases or elevators; or 10 ST/51566 of 2015
(b) construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry; or
(c) construction of a new residential complex or a part thereof; or
(d) completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c); or
(e) turnkey projects including engineering, procurement and construction or commissioning (EPC) projects;"
4. The learned Advocate has argued that the services provided by them to their main contractors are certainly not classifiable under the work contract service primarily for two reasons, firstly, as work contracts in respect of roads are exempted from the scope of work contract service, secondly, under the work contract service transfer of property in goods involved in execution of such contract need to be there involving sale of goods since it can be seen from the various contracts adjudicated by them that they have only provided the labour services in execution of most of their works and thus they cannot be classified under the category of work contract service as defined under Section 65 of the Finance Act, 1994. With regard to classification under category of commercial or industrial construction, the learned Advocate has taken us to the exclusion clause which specifically reads that the service does not include such services as provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams. It has further 11 ST/51566 of 2015 been contended that the CBEC in its Circular issued vide file No. F.No. B1/6/2005-TRU dated 27/07/2005 has clarified that the construction of roads is not liable to service tax. The learned Advocate has also relied upon the Notification No. 17/2005-ST dated 07/06/2005 wherein it has been provided that :-
"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 site formation and clearance, excavation and earthmoving and demolition and such other similar activities, referred to in sub-clause (zzza) of clause (105) of section 65 of the Finance Act, provided to any person by any other person in the course of construction of roads, airports, railways, transport terminals, bridges, tunnels, dams, ports or other ports, from the whole of service tax leviable thereon under section 66 of the said Finance Act.
This notification shall come into force on the 16th day of
2. June, 2005".
5. It can be seen from the text of the above notification that site formation, clearances, excavation, earth moving and demolition and such other activities pertaining to construction of road are also exempted from levy of service tax. Since, it can be seen from the scope of the work given in various contracts as mentioned in preceding paras that their activities are nothing but are similar or identical to what has been provided in the above notification and, therefore, same are outside the scope of levy of service tax.
12 ST/51566 of 2015
6. The learned Advocate has relied upon Hon‟ble Supreme Court judgment in the case of Doypack Systems (Pvt.) Ltd. vs. Union of India reported in 1988 (36) E.L.T. 201 (S.C.) interpreted the scope of other similar phrases used in the statue. The relevant extract is reproduced herein below :-
"48. The expression "in relation to" (so also "pertaining to"), is a very broad expression which pre-supposes another subject matter. These are words of comprehensiveness which might both have a direct significance as well as an indirect significance depending on the context, see State Wakf Board v. Abdul Aziz (A.I.R. 1968 Madras 79, 81 paragraphs 8 and 10,following and approving Nitai Charan Bagchi v. Suresh Chandra Paul (66 C.W.N. 767), Shyam Lal v. M. Shayamlal (A.I.R. 1933 All.
649) and 76 Corpus Juris Secundum 621. Assuming that the investments in shares and in lands do not form part of the undertakings but are different subject matters, even then these would be brought within the purview of the vesting by reason of the above expressions. In this connection reference may be made to 76 Corpus Juris Secundum at pages 620 and 621 where it is stated that the term "relate"‟ is also defined as meaning to bring into association or connection with. It has been clearly mentioned that "relating to" has been held to be equivalent to or synonymous with as to "concerning with" and "pertaining to". The expression "pertaining to" is an expression of expansion and not of contraction".
7. Thus, the learned Advocate has stated that they do not come under the scope of service tax under both the service tax categories under which the Adjudicating Authority has confirmed the demand. The learned Advocate has assailed the order-in-
13 ST/51566 of 2015 original with regard to invocation of extended period of demand as well as imposition of penalties under Section 76, 77 and 78 of the Finance Act, 1994. He has also taken shelter of the various judgments while arguing his case :-
(i) Siva Sankar Motors vs. CCE, Visakhapatnam - II
- 2008 (89) R.L.T. 873 (CESTAT - Ban.);
(ii) The Financers vs. CCE, Jaipur - 2007 (8) S.T.R. 7 (Tri. - Del.)
8. We have also heard the learned DR Shri V. Pandey, who has reiterated the findings given in the order-in-original.
9. We have heard both sides and also perused the record of appeal. It is a matter of fact that demand of service tax under impugned order has been confirmed under the category of commercial or industrial construction and work contract service.
It can be seen that the construction of road and activities in relation to construction of road are exempted from the scope of levy of service tax. We agree with the argument advanced by the learned Advocate that the activities of the appellant which are in relation to construction of road and highway projects are beyond the scope of levy of service tax by the virtue of exclusions added in the definition of both the service tax categories namely commercial or industrial construction as well as the work contract service. The Hon‟ble Karnataka High Court in their judgment in the case of BMR Construction Ltd. vs. Ministry of Finance, Government of India - 2013 (29) S.T.R. 469 (Kar.) has held 14 ST/51566 of 2015 that any service rendered in relation to the execution of a work contract in respect of railways is excluded under the clause (zzzza) of Section 65 (105) and, therefore it will fall outside the definition of taxable service. Similarly, this Tribunal in its judgment in the case of Ideal Road Builders Pvt. Ltd. vs. CST, Mumbai - 2013 (31) S.T.R. 350 (Tri. - Mumbai) has held that construction of roads has specifically been excluded from the scope of the service tax levy both under commercial or industrial construction service and work contract service. Further repairs and maintenance of roads have also been exempted from service tax retrospectively thus the intention of the Government is to keep out road construction activity from the purview of service tax.
10. In view of above, we are of the view that exclusion clause for activities regarding construction in relation to road also covers the type of the activities undertaken by the appellant and in view of the above cited decision of Hon‟ble High Court and this Tribunal, we hold a view that the service tax is not leviable on the sub-contractor activities undertaken by the appellant for construction of roads and, therefore, we do not find any merit in the order-in-original, same is set aside and appeal is allowed with all the consequential benefits.
(Operative part of the order pronounced in the open court.) (Anil Choudhary) (C.L. Mahar) Member (Judicial) Member (Technical) PK