2009 (8) TMI 734 - AT - Service Tax

Waiver of the pre-deposit - erection, commissioning or installation activity demand on the ground that activity rendered under works contract - Tribunal had held that a turnkey contract could not be vivisected and activity carried out in execution of the turnkey contract subjected to tax Held that - appellants are assessed to value added tax under the category of works contract - pre-deposit waived

Summary

Issues:
1. Liability for Service tax on commissioning or installation activities.
2. Applicability of penalties under various sections of the Finance Act, 1994.
3. Application for waiver of pre-deposit and stay of recovery of adjudged dues.
4. Interpretation of works contract and taxable activities.

Analysis:
1. The Appellant, M/s. Unitech Power Transmission Ltd., was involved in commissioning or installation activities without complying with statutory formalities, leading to a demand for Service tax of Rs. 96,04,768 along with interest. The impugned order imposed penalties under Section 78 of the Finance Act, 1994. The Appellant argued that the works contract they executed with AP Transco Hyderabad was taxable only from 1-6-07 onwards, citing precedents where turnkey contracts were not dissected for tax purposes. The Tribunal noted the pending question before a larger bench regarding vivisection of works contracts for taxation and observed the appellant's assessment under the AP Vat Act, 2005 as a works contract. Considering the arguments and precedents, the Tribunal found a prima facie case against the adjudged dues and granted a waiver of pre-deposit and a stay on recovery pending appeal.

2. The Commissioner confirmed the Service tax demand classifying the nature of the contract under erection, installation, and commissioning activities. However, the Tribunal, referencing previous decisions, acknowledged the appellant's VAT assessment under works contract category and the unsettled issue of vivisection of works contracts for taxation. This led the Tribunal to grant the waiver of pre-deposit and stay on recovery, recognizing a prima facie case made by the appellants.

3. The Appellant's contention regarding the taxation of their activities under a works contract before a specific date, coupled with the Tribunal's consideration of related precedents and pending questions before a larger bench, formed the basis for granting the waiver of pre-deposit and stay on recovery. The Tribunal's decision was influenced by the appellant's VAT assessment, the nature of the contract, and the ongoing legal debate surrounding the vivisection of works contracts for taxation purposes.

4. The Tribunal's analysis revolved around the classification of the Appellant's activities under a works contract, the applicability of Service tax, and the interpretation of precedents regarding the vivisection of turnkey contracts for taxation. By considering the appellant's VAT assessment and the unsettled legal question, the Tribunal found merit in the appellant's arguments and granted relief in the form of a waiver of pre-deposit and a stay on recovery pending further legal proceedings.