2010 (8) TMI 543 - AT - Service Tax

Waiver of pre-deposit - Commercial & industrial construction service or works contract service - The appellant submitted that the activity carried out was a works contract - the activity carried out by the appellant was to serve the purpose of the Petroleum Industry - Therefore, legislative intend to classify the activities of the nature carried out by the appellant serves purpose of Section 65(25b) of the Finance Act, 1994 - The benefit of doubt may also be given to him at the interim stage, we make it clear that this concession can not be granted as a matter of equity, since there is no equity about taxation when the appellant s activities appear to fall under Section 65(25b) of the Act according to our prima facie analysis as aforesaid - Direct to deposit the money.

Summary

Issues Involved:
1. Classification of the activity as "commercial & industrial construction" or "works contract."
2. Applicability and interpretation of Section 65(25b) and Section 65(105)(zzzza) of the Finance Act, 1994.
3. Validity of the service tax demand and penalties imposed.
4. Interim relief and pre-deposit requirements for the appellant.

Issue-wise Detailed Analysis:

1. Classification of the Activity:
The primary controversy revolves around whether the activity of constructing petrol pumps should be classified under "commercial & industrial construction" as per Section 65(25b) of the Finance Act, 1994, or as a "works contract" under Section 65(105)(zzzza). The Revenue argued that the activity was specifically designed for the petroleum industry, thus falling under "commercial & industrial construction service." The appellant contended that the activity involved the transfer of property in goods, qualifying it as a "works contract," which became taxable from 1-6-2007.

2. Applicability and Interpretation of Relevant Sections:
The Tribunal examined the scope of both Section 65(25b) and Section 65(105)(zzzza). It was noted that Section 65(25b) covers construction activities primarily for commerce or industry, including new buildings, civil structures, pipelines, and related services. Section 65(105)(zzzza) pertains to "works contracts" involving the transfer of property in goods during the execution of the contract for various activities, including construction for commerce or industry. The Tribunal concluded that the activities carried out by the appellant were more accurately classified under Section 65(25b), serving the purpose of the petroleum industry.

3. Validity of Service Tax Demand and Penalties:
The adjudication led to a service tax demand of Rs. 17,45,337/-, which was reduced to approximately Rs. 14,00,000/- at the first appellate stage. The Tribunal acknowledged the appellant's argument that "works contract" taxation started from 1-6-2007 and that similar activities previously taxable under different categories should now fall under "works contract." However, the Tribunal emphasized that the new entry under Section 65(105)(zzzza) did not make the previous entry under Section 65(25b) redundant. Both entries were deemed independent, serving their respective legislative purposes without encroaching on each other.

4. Interim Relief and Pre-deposit Requirements:
To balance the interim stage interests, the Tribunal directed the appellant to make a pre-deposit of Rs. 5,00,000/- in installments, considering the appellant's financial difficulties and the amount already deposited. The first installment of Rs. 50,000/- was to be paid by 30th August 2010, followed by nine equal monthly installments. Failure to comply would result in the vacation of the interim order, allowing the Revenue to realize its dues. The appellant was also required to file copies of the challans with the adjudicating authority to confirm compliance.

Conclusion:
The Tribunal's prima facie view was that the appellant's activities fell under Section 65(25b) of the Finance Act, 1994. The new entry under Section 65(105)(zzzza) did not repeal or encroach upon the previous entry. The appellant was directed to make a pre-deposit to exercise the right to appeal, ensuring the protection of Revenue's interests. The decision balanced legislative intent, the appellant's financial situation, and the need for compliance with tax laws.