Custom, Excise & Service Tax Tribunal
Sms Infrastructure Limited vs Nagpur on 24 February, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NOS: ST/133/2011 & ST/85305/2013
[Arising out of Orders-in-Original No: 09/ST/2010/C dated 29/10/2010 and 61/ST/2012/C dated 18/10/2012 passed by the Commissioner of Central Excise & Customs, Nagpur.]
For approval and signature:
Honble Shri M V Ravindran, Member (Judicial)
Honble Shri C J Mathew, Member (Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
:
No
2.
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
No
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
SMS Infrastructure Limited
Appellant
versus
Commissioner of Central Excise & Customs
Nagpur
Respondent
Appearance:
Shri Vikram Nankani, Sr. Advocate with Shri Aqueel Sherazi for the appellant Shri D. Nagvenkar, Additional Commissioner (AR) for the respondent CORAM:
Honble Shri M V Ravindran, Member (Judicial) Honble Shri C J Mathew, Member (Technical) Date of hearing: 24/02/2016 Date of decision: 24/02/2016 ORDER NO: ____________________________ Per: C J Mathew:
M/s SMS infrastructure is in appeal before us against two orders-in-original both passed by Commissioner of Central Excise & Customs, Nagpur in relation to various activities undertaken by them and incomes received as providers of service. They are, primarily, contractors for infrastructure projects and the demands pertain to alleged non-payment of tax under Finance Act, 1994 by them. The first appeal is directed against order no. 09/ST/2010/C dated 29th October 2010 which has confirmed a total amount of `28,48,55,027/- as tax due besides interest and imposing penalties under section 76 and 78 of Finance Act, 1994. The second is directed against order no. 61/ST/2012/C dated 18th October 2012 which has confirmed a tax demand of ` 11,55,45,002/- along with interest besides imposing penalties under section 76 and 78 of Finance Act, 1994.
2. The first component of the first demand relates to rendering of erection, commissioning and installation service taxable under section 65(105)(zzd) of Finance Act, 1994 rendered to M/s Maharashtra State Road Development Corporation and it is alleged that tax of ` 121,66,560/- has not paid by the appellant on the value of services rendered between 2004-05 and 2006-07. The second component of ` 22,31,03,573/- relates to construction of civil structures and erection, commissioning and installation services rendered to M/s Maharashtra Enviro Power Ltd, M/s Vidharbha Enviro Power Ltd and at certain project sites at Raipur and it is alleged that the appellant had discharged tax liability without including the goods component in the gross taxable value without producing evidence of value of goods supplied. A short-levy of `4,81,96,016/- has been confirmed in relation to construction of railway sidings for M/s Vedanta Aluminium Ltd, M/s BALCO and M/s MSEB which has been held to be taxable as construction service. An amount of `13,88,878/- has been demanded for rendering site formation and clearance service to M/s Western Coalfields Ltd.
3. The second demand also demands `4,96,78,270/- towards construction of railway sidings for M/s MAHAGENCO and ` 4,14,14,117/- towards tax unpaid on mobilization advance received from principals with whom contracts were entered into. An amount of `2,44,52,615/- was demanded on account of outstandings from associate concerns.
4. Learned Senior Advocate presenting the case of the appellant has focussed on the taxes confirmed in relation to construction of railway sidings in both orders and the work related to mines in the first demand. It is contended that the work rendered to M/s MSRDCL was always claimed to be works contracts which the adjudicating authority refused to accept and, according to him, the issue stands settled by the decision of the Honble Supreme Court in Commissioner of Central Excise & Customs, Cochin v. Larsen & Toubro Ltd [2015 (39) STR 916 (SC)] . It is also contended that, in relation to services rendered to M/s MEPL, M/s VEPL and M/s CSEB, tax liability on the labour contract had been discharged at the appropriate time and that the cost of goods involved were, in accordance with section 67 of Finance Act, 1994, correctly excluded. As far as mobilization advance is concerned, it is contended that the adjudicating authority failed to appreciate the submissions made by the assessee to the effect that these are payments received towards obtaining necessary equipment and creating basic facilities before the commencement of rendering of service. Reliance was placed on the order of the Tribunal in Thermax Instrumentation Ltd v. Commissioner of Central Excise, Pune [2015-TIOL-2736-CESTAT-MUM] which has enumerated the various judicial decisions that advances made cannot be subject to tax if such advances are adjusted against dues for rendering of service as that would amount to double taxation. We respectfully follow these decisions.
5. On the issue of outstandings on account of associate concerns, it is contended that tax liability was being discharged upon receipt of dues as prescribed in the statute upto May 2008; consequently, there is no outstanding due. Learned Authorised Representative was not in a position to convince us that these submissions were incorrect. Accordingly, we hold that the dues that were liable to be discharged by various payments made as claimed in the appeal and as recorded in the impugned orders on the respective heads. We are, therefore, left to examine in detail the submissions made in connection with the construction of railway sidings and the sinking of the mine shaft on which, admittedly, the appellant has not effected any payment of tax.
6. In relation to the mine, which Revenue claims to be nothing but site formation and clearance, it is the contention of the appellant that mining service was rendered taxable only after 2007 and that site formation and clearance service was intended to tax the work that precedes construction activities.. Drawing attention to section 2 of the Coal Mines (Nationalisation0 Act, 1973, Learned Authorized Representative contended that mines are excavations and shafts are the connection between the surface of the earth and the location of the coal seams and that these definitions would indicate that section 65(105)(zzzy) of Finance Act, 1994 is intended to tax services rendered in an existing mine. That submission does not convince because the statute referred to was enacted with the object of nationalising existing coal mines and, therefore, would have a restrictive definition. Reliance was placed on paragraph 6.2 of the budget circular B1/6/2005-TRU dated 27th July 2005 which clarifies the scope of section 65(97a) in relation to the taxable entry in section 65 (105)(zzza) of Finance Act, 1994 effective from 13th May 2005 to include the work carried out prior to mining. We do not doubt that such may have been the tenor of the communication intended by the Tax Research Unit. However, in the light of a subsequent entry to tax mining service by section 65(105)(zzzy) of Finance Act, 1994 with effect from 1st June 2007 which was intended to cover all activities relating to mineral exploration and extraction under one head as a consolidation entry, the actual sinking of a shaft cannot be treated as site formation and clearance service but as related to excavation of mineral from the mine. Consequently, we are in agreement with the appellant that the demand for the disputed period is not valid.
7. On the remaining issue of construction of railway sidings, we have perused the various contracts placed before us. These were entered into in consequence of a policy shift of the Government of India in the Ministry of Railways to tap private sector investment for building national assets in track and rolling stock. Elaborate rules, guidelines and contracts have been devised to render such high-investment projects attractive to investors while at the same time retaining control over the additions to the railway network as well as its integration with the existing infrastructure. The relevant sub-clause in section 65 of Finance Act, 1994 which defines commercial and industrial construction is:
(25b) "Commercial or Industrial Construction" means -
(a) construction of a new building or a civil structure or a part thereof; or
(b) 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
(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, 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; and (105)(zzq) Taxable Service means any service provided or to be provided to any person, by any other person, in relation to commercial or industrial construction
8. Learned Authorised Representative places reliance on the decision of this Tribunal in AB Projects Pvt Ltd v. Commissioner of Central Excise, Nagpur [2010 (19) STR 886 (Tri-Mumbai)] to contend that any activity of construction that is able to generate revenue will not be exempt from levy of service tax. We take note of the specific exclusion of railway work from the definition (supra). Revenue contends that the exemption is accorded to railways that are used as public carriage of passengers and goods which the projects undertaken by the appellant are not. Appellant relies upon the decision of the Tribunal in Afcons Infrastructure Ltd v Commissioner of Central Excise Mumbai-II [2015 (38) STR 194 (Tri-Mumbai)] and Delhi Metro Rail Corporation Limited v. Municipal Corporation of Delhi and Others [2008 (103) DRJ 369] to drive home the point that coverage under Railways Act, 1989 is sufficient to consider any such infrastructure as railways. We notice that the Railway Act, 1989 provides for railways with public investment and private investment and both function under the same statute. Such railways established in the private sector have a statutorily acknowledged Administrator. Consequently, we too hold that railway sidings built by the appellant fall within the exclusionary portion of section 65(25a) and are outside the ambit of taxation.
9. For the above reasons, we confirm the liability to tax on the labour portion of work executed by the appellant and which has been duly discharged by them. The demands under the other heads are set aside. Penalties are also set aside.
10. Appeals are accordingly disposed off.
(Pronounced in Court) (M V Ravindran) Member (Judicial) (C J Mathew) Member (Technical) */as 9 9