Custom, Excise & Service Tax Tribunal
M/S. Karnataka Rural Infrastructure ... vs Cst, Bangalore on 6 December, 2010
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Bench Division Bench
Court I
Date of Hearing: 28/10/2010
Date of decision:..
Appeal No.ST/7, 894/09
(Arising out of Orders-in-original No.43/2008 dt. 30/9/2008 & No.38/2009 dt. 25/8/2009 passed by CST, Bangalore)
For approval and signature:
Honble Mr. M.V. Ravindran, Member(Judicial)
Honble Mr. B.S.V. Murthy, 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 the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
No
3.
Whether their Lordship wish to see the fair copy of the Order?
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
Yes
M/s. Karnataka Rural Infrastructure Development Ltd.
(Formerly Karnataka Land Army Corporation Ltd.)
..Appellant(s)
Vs.
CST, Bangalore
..Respondent(s)
Appearance Mr. K.S. Ravishankar and Mr. A.R. Nayak, Advocates for the appellant.
Mr. D.P. Nagendra Kumar, Jt.CDR for the Revenue.
Coram:
Honble Mr. M.V.Ravindran, Member(Judicial) Honble Mr. B.S.V. Murthy, Member(Technical) FINAL ORDER No._______________________2010 Per M.V.Ravindran These two appeals are directed against the Orders-in-original No.43/2008 dt. 30/9/2008 & No.38/2009 dt. 25/8/2009. Since the issue involved in these two appeals pertains to the very same assessee, for two different periods, they are being disposed of by a common order.
2. The appellant herein is Govt. of Karnataka undertaking and engaged in construction of building, roads and other civil works for Govt. of Karnataka. They are registered with the Department under the category of Consulting Engineer service as defined under Section 65(31) of the Finance Act, 1994. The appellant was also engaged in the activity of maintenance of roads, construction of drainage, upgradation of sidewalks, asphalting of roads etc. as per the agreements entered with various Govt. agencies. On an intelligence gathered by the officers of the Service Tax commissionerate, records were sought for verification from the appellant and on verification of the records, it was noticed that the appellant had, during the period 15/10/2005 to 30/11/2006 and 1/12/2006 to 31/3/2008, executed various contracts to complete the work of upgradation of sidewalks, asphalting of roads and strengthening of footpaths and re-surfacing of the various roads for various State Government agencies including municipal corporation and municipalities. On a conclusion that the appellant had failed to discharge the service tax liability under the head management, maintenance or repair of immovable property, show-cause notices were issued for demand of the duty, consequent penalties and interest. Appellant contested show-cause notices mainly on the ground that their services were rendered towards the upgradation, strengthening or construction of drains and roads and hence, they would not fall under the category of management, maintenance or repair services. Appellant also pleaded the limitation angle. The Adjudicating Authority did not agree with the appellants contention and held that the appellant is liable for discharge of service tax liability on the amounts received for execution of the contracts, confirmed the demand, demanded interest and imposed penalty under Section 76 & 77 but did not impose any penalty under Section 78 of the Finance Act, 1994. Aggrieved of these orders, appellant is before us.
3. Ld. Counsel would submit that the impugned order is totally wrong in coming to the conclusion that the activity of the appellant falls under the category of management, maintenance or repairs of immovable property as the appellant always was taking the work of roads which is not a immovable property, much less a private property and falls within the jurisprudence of eminent domain / sovereign domain and hence this would be excludable from the category of immovable property. It is the submission that the activity of the appellant being done on a public property, the said activity cannot be brought under the service tax, given a specific exclusion in the statutory definitions. Alternatively, it was submitted that the definition of commercial or industrial services would be more appropriate, if it is held so, then, there is a specific exclusion for the activity undertaken in or in relation to roads. It is further submitted that the definition of works contract would also exclude the activity done in respect of roads etc. It is the submission that the lower authorities could not have taxed the activity under some other head when it is specifically mentioned in specific heading. It is the submission that as per the principles of classification, specific head would exclude the general heading. Hence the activity conducted by the appellant would not fall under the category of other than management, maintenance or repairs of immovable property services. It is the submission that the Adjudicating Authority has himself held that there is no need for invocation of extended period despite holding so, the Adjudicating Authority has confirmed the demand for entire period covering the show-cause notices. It is the submission that the contracts entered by them with various authorities is of composite nature and hence the entire activity could not have fall under the category of maintenance, management or repairs of immovable properties. It is prayed that the impugned orders be set aside and the appeals be allowed.
4. Ld. Jt.CDR on the other hand would draw our attention to the definition of maintenance, management or repair services. He would submit that the activity undertaken by the appellant is falling under maintenance or repairs of immovable properties. It is his submission that the public road as sought to be put forth by the appellant under the sovereign domain cannot be disputed but at the same time, the said public road is an immovable property. He would rely upon the Boards circular F.No.B1/6/2005-TRU dt. 27/7/2005 to submit that this activity is covered under the category of maintenance or repair services.
5. We have considered the submissions made at length by both sides and perused the records.
6. The issue involved in this case is whether the activity undertaken by the appellant would fall under the category of maintenance, management or repairs services as sought to be done by the Revenue or otherwise. On perusal of the records, we find that there is no dispute that the appellant had entered into contract/agreement with BBMP and various other authorities for the purpose of doing the work related to the roads. On perusal of the annexure to the show-cause notices, wherein the demand of the service tax liability has been worked out, we find in the remarks column, there is a categorical mention construction of drains, providing drain covers, providing cement concrete and cobble stone for footpath, providing cement concrete kerbs, asphalting of roads and various other activities. At this juncture, we notice that there could be a construction activity and also there could be supply of materials. In the entire orders-in-original, the Adjudicating Authority has addressed himself only to the issue of inclusion of the appellants activity under the category of maintenance, management or repairs, services but has not considered the factual position as regards the construction activity and supplies aspect. We find that CBEC vide Circular No.110/4/2009-ST dt. 23/2/2009 has given a clarification regarding the levy of service tax on repair/renovation/widening of roads. The said circular categorically lists down the activity which would fall under the category of maintenance or repair activities and which activity would fall under the category of construction work. There is also a specific direction to the field formations that the cases may be decided accordingly as per the circular. In our considered view, the issue needs to be re-considered by the Adjudicating Authority, as there may be an element of construction and an element of asphalting, which if read with the Boards circular dt. 23/2/2009 may point towards a plausible conclusion, other than which the Adjudicating Authority has arrived at. Since this circular was not available to the Adjudicating Authority, at the time of passing the impugned order and also that the Adjudicating Authority has not considered the factual aspect of construction in the entire contracts, we deem it fit to set aside the impugned orders and remit the matter back to the Adjudicating Authority. Accordingly, without expressing any opinion on the merits of the case, keeping all the issues open, we set aside the impugned orders and remand the matter back to the Adjudicating Authority to re-consider the issue afresh and to arrive at a conclusion after following the principles of natural justice.
(Pronounced on .) (B.S.V. MURTHY) MEMBER (TECHNICAL) (M.V. RAVINDRAN) MEMBER (JUDICIAL) Nr 6