Custom, Excise & Service Tax Tribunal
B.P. Sangle & Construction Pvt. Ltd vs Assistant Commissioner, Service Tax ... on 18 August, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No.ST/506/10-Mum (Arising out of Order-in-Appeal No. AKP/234/NSK/2010 DT dated 11/08/2010 passed by Commissioner of Central Excise & Customs (Appeals), Nashik) For approval and signature: Honble Mr. M.V. Ravindran, Member (Judicial) and Honble Mr. C.J. Mathew, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== B.P. Sangle & Construction Pvt. Ltd. Appellant Vs. Assistant Commissioner, Service Tax Cell, Nashik Respondent Appearance: Shri- Venkatesh Iyer, Consultant for Appellant Shri- A.K. Goswami, Additional Commissioner (AR), for Respondent CORAM: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical) Date of Hearing : 18/08/2015 Date of Decision : 18/08/2015 ORDER NO Per: M.V. Ravindran
This appeal is directed against Order-in-Appeal No. AKP/234/NSK/2010 DT dated 11/08/2010.
2. The relevant facts that arise for construction are the appellant is holding service tax registration for the service of commercial or industrial construction. They are engaged is executing, commissioning of sewerage pipe line which includes excavation, construction of inspection chambers and other civil works which and water bound macadam. On going through the contract details and tender details, it is seen that the work done by the respondent is rightly covered composite contract wherein, with laying of pipes, other work viz. construction of sewers, construction of manholes of sewer, is also executed. Therefore the contract is a works contract where respondent has to bring all equipments of structures i.e RCC pipes and also to provide the services in relation to putting/laying, those structures along with providing other incidental services. The respondent is also paying VAT tax on the said work. Hence proper category of the service is Works Contract covered by Section 65 (105) (zzzza) of Finance Act, 1994. During the period from March-2008 to March-2009, the respondent has provided service of Rs. 5,22,27,337/- out of which VAT-TDS of Rs. 8,43,518/- was deducted by the service recipient. Thus value chargeable to service tax is Rs.5,13,83,819/- and service tax of Rs. 20,55,353/- livable thereon has not been paid by them in contravention of various section/rules by suppressing facts and they failed to take out service tax registration. Hence, SCN dated 10-12-2009 was issued to the respondent proposing levy and confirmation of service tax of Rs. 20,55,253/-, under proviso to Section 73(1) together with interest under Section 75 and also proposing penalty under Section 78 of Finance Act, 1994. Revenue was aggrieved by the order of the adjudicating authority who dropped the proceeding initiated by the show cause notice. The first appellate authority after following the due process of law set aside the impugned order and confirmed the demand of service tax, interest thereof and imposed penalties.
3. Heard both sides and perused the records.
4. The issue involved in this case is whether the services rendered by the appellant of sewerage line/sanitation work carried out for Nashik Municipal Corporation would be liable to service tax under the works contract on or otherwise. The first appellate authority as well as the departmental representative submits that the activity of lying of sewage lines and satiation work, is covered under Works Contract Services that would be covered under erection explanation cross (II) (a) and hence will be liable for tax as par board circular dated 28.02.2007. It is also the submission of the learned departmental representative that the activity undertaken by the appellant would fall under the category of respiration, elevation, renovation and taxation and hence taxable.
5. We find that the issue is no more res-integra. The larger bench of the Tribunal in the case of Lanco Infratech Ltd. and oters-2015 TIOL-768-CESTAT-BANG-LB was called upon to consider the very same issue. Of the larger bench in paragraph No. 21 held as under:-
21. In the light of the foregoing analyses, we record our conclusions on the several issues framed, as follows:
(a) Issue (A): Laying of pipelines/ conduits for lift irrigation systems for transmission of water or for sewerage disposal, undertaken for Government/ Government undertakings and involving associated activities like trenching, soil preparation and filling, supporting masonry work, jointing of pipes, electro-mechanical works or pumping stations and like activity, is classifiable only under Commercial or Industrial Construction Service (CICS) for the period upto 01.06.2007 and not under Erection, Commissioning or Installation Service (ECIS);
(b) Issues (B); (C) and (D) :
(i) Construction of canals for irrigation or water supply; construction or laying of pipelines/ conduits for lift irrigation conceived and integrated into a dam project, must be classified as works contract "in respect of dam" and is thus excluded from the scope of "Works Contract Service" defined in Section 65(105)(zzzza) of the Act, in view of the exclusionary clause in the provision;
(ii) Turnkey/ EPC project contracts, enumerated in clause (e), Explanation (ii) in Section 65(105)(zzzza) of the Act is a descriptive and ex abundant cautela drafting methodology. In the light of the decision in Alstom Projects India Ltd ., fortified by the Special Bench decision (dated 19.03.2015) in Larsen & Toubro Ltd. reference, a turnkey/ EPC contract is taxable prior to 01.06.2007 as well. On and since 01.06.2007, turnkey/ EPC contracts must be classified on the basis of the essential character of the service provided thereby, with the aid of classification guidelines set out in Section 65A(2) of the Act. Consequently, a turnkey/ EPC contract must be classified under any of the clauses (a) to (d), Explanation (ii), Section 65(105)(zzzza). The bundled bouquet of services provided as turnkey/ EPC contract, classifiable as Commercial or Industrial Construction Service (CICS) prior to 01.06.2007, would be classifiable under clause (b), Explanation (ii), Section 65(105)(zzzza) on and from 01.06.2007 and would not be exigible to service tax if the rendition of service thereby is primarily for non-commercial, non industrial purpose, in view of the exclusionary clause in clause (b) of the definition of WCS.
This is the only possible and harmonious interpretation possible of the several clauses under Explanation (ii) of Section 65 (105)(zzzza), a distinct taxable service defined with constituent elements thereof substantially drawn from elements of pre-existing taxable services like ECIS, CICS or COCS; and other services when bundled to amount to turnkey/ EPC;
(iii) Construction of canals/ pipelines/ conduits to support irrigation, water supply or for sewerage disposal, when provided to Government/ Government undertakings would be for non-commercial, non-industrial purposes, even when executed under turnkey/ EPC contractual mode and would fall within the ambit of clause (b), Explanation (ii) of Section 65(105)(zzzza); and would consequently not be exigible to service tax, in view of the exclusion enacted in clause (b); and
(c) Issue (E): Where under an agreement, whether termed as works contract, turnkey or EPC, the principal contractor, in terms of the agreement with the employer/ contractee, assigns the works to a sub- contractor and the transfer of property in goods involved in the execution of such works passes on accretion to or incorporation into the works on the property belonging to the employer/ contractee, the principal contractor cannot be considered to have provided the taxable (works contract) service enumerated and defined in Section 65(105)(zzzza) of the Act.
6. In view of the decision of the larger bench, we find that the impugned order is unsustainable and liable to be set aside and we do so. The impugned order is set aside and the appeal is allowed.
(Pronounced in Court) (C.J. Mathew) Member (Technical) (M.V. Ravindran) Member (Judicial) akp 1 5 APPEAL No.ST/506/10-Mum