Custom, Excise & Service Tax Tribunal
Lyngdoh Engineer & Builders Co Pvt Ltd vs Shillong on 6 March, 2025
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO. 1
Service Tax Appeal No. 71198 of 2013
(Arising out of Order-in-Original/ST/SHILLONG No. 06/2013 dated 25.06.2013 passed
by the Commissioner of Central Excise, Morellow Compound, M.G. Road, Shillong -
793 001)
M/s. Lyngdoh Engineer & Builders Co. Pvt. Ltd. : Appellant
N.L. Complex, Dhankheti,
District: East Khasi Hills, Shillong,
Meghalaya
VERSUS
Commissioner of Central Excise : Respondent
Shillong Commissionerate
Morellow Compound, M.G. Road,
Shillong - 793 001
APPEARANCE:
Shri Gaurav Kumar Jain, Advocate for the Appellant
Shri Prasenjit Das, Authorized Representative for the Respondent
CORAM:
HON'BLE SHRI ASHOK JINDAL, MEMBER (JUDICIAL)
HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NO. 75622 / 2025
DATE OF HEARING: 27.02.2025
DATE OF DECISION: 06.03.2025
ORDER:[PER SHRI K. ANPAZHAKAN] The present appeal has been filed by M/s. Lyngdoh Engineer & Builders Co. Private Limited, N.L. Complex, Dhankheti, District: East Khasi Hills, Shillong, Meghalaya (hereinafter referred to as the "appellant") against the Order-in- Original/ST/SHILLONG No. 06/2013 dated 25.06.2013 wherein the ld. adjudicating authority has confirmed the demand of Service Tax (inclusive of Page 2 of 13 Appeal No.: ST/71198/2013-DB cesses) totally amounting to Rs.75,32,597/-, along with interest, and imposed equal amount of tax as penalty under Section 78 of the Finance Act, 1994. A penalty of Rs.5,000/- has also been imposed under Section 77 of the Finance Act, 1994.
2. The facts of the case are that during the period from 2007-08 to 2008-09, the appellant had undertaken contract for construction of approach road to the plant site of M/s. JUD Cements (P) Limited, Meghalaya. In the process of construction of approach road to the plant, the appellant also acquired some land as a 'pure agent' of the cement plant.
2.1. The Department initiated an investigation against the appellant on the allegation that the appellant had not obtained Service Tax Registration and had not discharged Service Tax on the taxable services rendered to M/s. JUD Cements (P) Ltd. On the basis of the investigation, a Show Cause Notice dated 19.10.2012 was issued and after due process, the said notice was adjudicated resulting in the impugned order, which is the subject matter of the present appeal.
3. The appellant has primarily made the following submissions: -
a) for the year 2007-08:
i. They have sold total value of machinery worth Rs.2,08,01,562/- to M/s. JUD Cements (P) Ltd., but in the impugned order, the ld. adjudicating authority considered only an amount of Rs.1,60,85,351/- and thus the additional amount of Rs.47,16,209/- is liable to be deducted from the taxable value.Page 3 of 13
Appeal No.: ST/71198/2013-DB ii. The appellant submits in this regard that in respect of construction of road, they received Rs.4,17,89,638/- in the year 2007-08. It is submitted that the services rendered in connection with the construction of road are specifically exempt from the purview of Service Tax and the Letter F.No.B1/6/2005-TRU dated July 27, 2005 supports this contention.
iii. Further, the appellant has submitted that they have undertaken development and site formation work in connection with road construction which is exempt as per Notification No. 17/2005-S.T. dated 07.06.2005 iv. It is also submitted that the payment of Rs.48,17,022/- received from M/s. JUD Cements (P) Ltd. on account of sale of land is not liable to Service Tax.
b) for the year 2008-09:
i. It is submitted that Rs.48,98,009/- and Rs.59,62,289/- have been shown in the books of account as received from M/s. JUD Cements (P) Ltd. by mistake; this amount has been received prior to the introduction of the "supply of tangible goods service" i.e., prior to 16th May, 2008. In view of this, the appellant contends that there is no Service Tax liability on this count.
ii. Moreover, the appellant submits that an amount of Rs.47,41,968/- has not been received from M/s. JUD Cements Ltd. and it continued to be shown in the books of M/s. JUD Cements (P) Ltd. as 'unsecured loan'. During the relevant Page 4 of 13 Appeal No.: ST/71198/2013-DB period, Service Tax is payable only on the receipt amount; as the appellant has not received the amount of Rs.47,41,968/-, they contend that there is no liability of Service Tax on this count.
3.1. Further, the appellant submits that they have already deposited Service Tax to the tune of Rs.13,14,171/- along with interest of Rs.10,26,264/-, which may be appropriated against their service tax liability, if any.
3.2. Without prejudice to the above, the appellant also inter alia contended as under: -
• The Ld. Commissioner failed to appreciate that construction of road as well as development activities for construction of road are exempted from the purview of the service tax and the amount of Rs. 4,17,89,638/-which is pertaining to the service of construction of road as well as development activities for construction of road should not form part of the value of taxable service.
• By virtue of Notification No. 17/2005 ST Dt. 07.06.2005 '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, is exempt from the whole of service tax leviable thereon under section 66 of the said Finance Act, 1994.Page 5 of 13
Appeal No.: ST/71198/2013-DB • The Ld. Commissioner failed to consider that construction of road whether public or private is not the criterion for getting the benefit under notification No.17/2005-ST dated June 7, 2005. The criterion for exemption is that the activity of construction of road should be taken on the basis of separate recognizable contract. The learned Commissioner failed to appreciate that from the invoices enclosed in the said notice, it is clear that the activity of road construction has been undertaken by a separate contract tax and hence is eligible for exemption from service tax.
• The Ld. Commissioner erred in distinguishing the roads being public or private while examining the eligibility of notification No.17/2005-ST dated June 7, 2005 when no such criteria is present is the body of the said law.) notification and the same is illegal, invalid and bad in law.
• In support of the view that road construction is not liable to Service Tax, the appellant has placed reliance on the decision in the case of M/s. Rajendra Singh Bhamboo vs Commissioner of Central Excise and Service Tax, Jaipur-I [Final Order No. 50968 of 2018 dated 13.03.2018 in Service Tax Appeal No. 55339 of 2013 - CESTAT, New Delhi] .
3.3. Regarding their claim of land value of Rs.1,60,56,048/- and not Rs.48,17,022/-, the appellant submits a table evidencing the same, which is reproduced below: -
Page 6 of 13Appeal No.: ST/71198/2013-DB Voucher Date Value of Actual Value of Difference No. Land Land (in Rs.) Allowed (in Rs.) (in Rs.)
4 01-04-2007 16,51,672 29,01,547 12,49,875 222 30-04-2007 17,79,350 81,29,042 63,49,692 2740 31-12-2007 - 36,39,460 36,39,460 3123 31-01-2008 13,86,000 13,86,000 -
48,17,022 1,60,56,049 1,12,39,027 In view of the above, it is submitted by the appellant that the additional amount of Rs.48,17,022/- is to be deducted from the taxable value.
3.4. In view of the above, the appellant prayed that the demands confirmed in the impugned order are not sustainable.
4. On the other hand, the Ld. Authorized Representative of the Revenue reiterated the findings in the impugned order.
5. Heard both sides and perused the appeal records.
6. We observe that the ld. adjudicating authority has confirmed the demand of Service Tax (inclusive of cesses) amounting to Rs.75,32,597/-, along with interest, pertaining to the period from 2007-08 to 2008-09. The appellant has submitted the details of the amounts in dispute during the respective financial years and the service tax liability in respect of the said amounts is examined in the following paragraphs.
Page 7 of 13Appeal No.: ST/71198/2013-DB Demand raised for the year 2007-08:
6.1. We take note of the submission of the appellant in this regard that they have sold total value of machinery worth Rs.2,08,01,562/- to M/s. JUD Cements (P) Ltd., but in the impugned order, the ld.
adjudicating authority considered only an amount of Rs.1,60,85,351/- and thus, it has been contended that the additional amount of Rs.47,16,209/- is liable to be deducted from the taxable value. We observe that this needs to be verified by the ld. adjudicating Authority and for that purpose, the issue needs to be remanded back to the adjudicating authority.
6.2. We also observe that the appellant claims to have received Rs.4,17,89,638/- in the year 2007-08 towards construction of road, which is specifically exempted from the purview of Service Tax. They have cited the Letter F.No.B1/6/2005-TRU dated July 27, 2005 in support of this contention. In support of the view that road construction is not liable to Service Tax, the appellant has also placed reliance on the decision in the case of M/s. Rajendra Singh Bhamboo vs Commissioner of Central Excise and Service Tax, Jaipur-I [Final Order No. 50968 of 2018 dated 13.03.2018 in Service Tax Appeal No. 55339 of 2013
- CESTAT, New Delhi] wherein while examining the definition of Commercial and Industrial Construction Service under Section 65(105)(zzq) of the Finance Act, 1994, the Bench held as under:
"On perusal of the above definition, it would reveal that construction of roads is excluded from the preview of such taxable service. The definition of taxable service does not specify the type of roads, whether private or public for the purpose of consideration of such exclusion Page 8 of 13 Appeal No.: ST/71198/2013-DB clause. Since the definition is specific to service provided in respect of road only, in our considered view, it cannot be interpreted that only construction of public roads should get the benefit of exclusion provided in such definition clause. In other words, irrespective of the purpose of construction of the road, whether for public utility or for the utility of organization concerned for their use, the benefit of exclusion clause provided in the definition under 65(25)(b) of the Act should be available, for non-levy of Service Tax. Since there is no ambiguity in plain reading of the definition and in view of the admitted fact that the appellant had constructed roads for different commercial entities/organization, the benefit of the exclusion provided in the definition clause should be available to it."
6.2.1. Thus, by relying on the decision cited supra, we hold that the demand of service tax confirmed with respect to construction of road is not sustainable and accordingly, the same is set aside.
6.3. Further, we also find that the appellant has urged before us that the development and site formation work undertaken by them in connection with road construction is exempt as per Notification No. 17/2005-S.T. dated 07.06.2005. For ready reference, the extract of the said notification is reproduced below:
"Notification No. 17/2005-S.T., dated 7-6-2005 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), Page 9 of 13 Appeal No.: ST/71198/2013-DB 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.
2. This notification shall come into force on the 16th day of June, 2005."
6.3.1. From the Notification No. 17/2005-ST dated 07.06.2005 reproduced supra, we observe that by virtue of the same, '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, is exempt from the whole of service tax leviable thereon under section 66 of the said Finance Act, 1994. However, we find that the Ld. Commissioner has not extended the benefit of the said notification on the ground that the road constructed is not for the use of general public. In this regard, we observe that construction of road being private or public is not the criterion for eligibility to the benefit under Notification No.17/2005-ST dated June 7, 2005. The criterion for exemption is that the activity of construction of road should be undertaken on the basis of a separate recognizable contract. The Ld. Page 10 of 13 Appeal No.: ST/71198/2013-DB Commissioner failed to appreciate that from the invoices enclosed in the said notice, it is clear that the activity of road construction has been undertaken by a separate contract. We observe that the Ld. Commissioner erred in distinguishing the roads being public or private while examining the eligibility to Notification No.17/2005-ST dated June 7, 2005 when no such criteria is present is the body of the said notification. Accordingly, we hold that by virtue of Notification No. 17/2005-ST dt. 07.06.2005 the appellant is eligible for the exemption provided for the 'Site formation and clearance, excavation and earthmoving and demolition' and such other similar activities rendered by them. Thus, we hold that the demand of service tax confirmed in this regard is not sustainable and hence we set aside the same.
6.4. It is also observed that the appellant has raised the ground that they are eligible for exemption from Service Tax with respect to the payment of Rs.48,17,022/- received from M/s. JUD Cements (P) Ltd. on account of sale of land. We agree with the submission of the appellant that sale of land value is not liable to Service Tax. However, this needs to be verified by the ld. adjudicating authority and for that purpose, the issue needs to be remanded back to the adjudicating authority.
b) for the year 2008-09:
7. With regard to the demand raised during the said period, we find that the appellant has submitted that Rs.48,98,009/- and Rs.59,62,289/- have been shown in the books of account as received from M/s. JUD Cements (P) Ltd. by mistake; they contend that this amount has been received prior to the Page 11 of 13 Appeal No.: ST/71198/2013-DB introduction of the "supply of tangible goods service"
i.e., prior to 16th May, 2008. In view of this, the appellant has contended that there is no Service Tax liability on this count. We agree with the submission of the appellant in this regard. If the evidences available on record indicate that these amounts have been received prior to 16.05.2008, then no Service Tax is payable on these amounts. However, we are of the view that this needs to be verified by the ld. adjudicating Authority and for that purpose the issue needs to be remanded back to the adjudicating authority.
7.1. The appellant has also submitted before us that the amount of Rs.47,41,968/- has not been received from M/s. JUD Cements Ltd. and it continued to be shown in the books of M/s. JUD Cements (P) Ltd. as 'unsecured loan' and hence it is their contention that no service tax is payable on this amount as they have not received the said amount. In this regard, we agree with the submission of the appellant. During the relevant period, Service Tax is payable only on the amount received by the appellant. However, the claim of the appellant that they have not received the amount of Rs.47,41,968/-, needs to be verified by the ld. adjudicating authority and for that purpose, the issue is also required to be remanded back to the adjudicating authority.
8. Regarding the penalty imposed on the appellant, we observe that the service tax liability is to be re-quantified as per the discussions in the previous paragraphs and hence, the demand of Service Tax along with interest and penalty confirmed in the impugned order is set aside. On re- quantification of their Service Tax liability, the Page 12 of 13 Appeal No.: ST/71198/2013-DB adjudicating authority may decide the liability of penalty, if any required, afresh, based on his findings.
9. Further, we observe that the appellant has claimed that they have already deposited Service Tax to the tune of Rs.13,14,171/- along with interest of Rs.10,26,264/-. This needs to be verified. If the payment of service tax and interest is found to be correct, then the same may be appropriated against their service tax liability.
10. In view of the above discussions, we pass the following order:
(i) We hold that the demand of service tax confirmed with respect to construction of road is not sustainable and accordingly, the same is set aside.
(ii) We hold that by virtue of Notification No. 17/2005 ST Dt. 07.06.2005, the appellant is eligible for the exemption provided for the 'Site formation and clearance, excavation and earthmoving and demolition' rendered in connection with road construction.
(iii) The issues relating to exemption from service tax claimed by the appellant needs to be verified by the ld. adjudicating authority, as discussed in paragraphs 6.1, 6.4, 7, 7.1, 8 and 9 of this Order. The issue is therefore remanded back to the adjudicating authority for verification as per our discussions in the said paragraphs.Page 13 of 13
Appeal No.: ST/71198/2013-DB
11. The appeal filed by the appellant is disposed on the above lines.
(Order pronounced in the open court on 06.03.2025) Sd/-
(ASHOK JINDAL) MEMBER (JUDICIAL) Sd/-
(K. ANPAZHAKAN) MEMBER (TECHNICAL) Sdd