2011 (4) TMI 1174 - AT - Service Tax

Stay Applications - Construction of Dam or not - principal contractor as well as the sub-contractor, are denying the liability of Service Tax on the services which have been rendered by them Held that - construction of ash pond and civil works for ash dyke for a thermal power plant would qualify under the category of Industrial Construction Service and therefore, would be liable to Service Tax under the category of Commercial or Industrial Construction Service. Such construction cannot be held to be construction of a dam as normally understood. Thus the appellants have not made out a prima facie case for a full waiver of pre-deposit, principal contractor to deposit a sum of Rs. 20.00 lakhs (Rupees twenty lakhs only) under the provisions of Section 35F of the Central Excise Act, 1944

Issues:
1. Stay Applications related to Service Tax and penalties against two companies.
2. Classification of construction activities under taxable services.
3. Time-barred demand for Service Tax.
4. Liability of sub-contractor for Service Tax.
5. Interpretation of judicial pronouncements in similar cases.
6. Consideration of pre-deposit and tax liability for principal contractor and sub-contractor.

Analysis:
1. The judgment involved two Stay Applications concerning Service Tax demands and penalties against two companies. The first company, M/s. National Projects Construction Corporation Ltd., was demanded Service Tax for construction activities related to ash ponds and civil works for a thermal power plant. The Commissioner confirmed the demand and penalties, stating the activities fell under 'commercial or industrial construction service.' The second company, M/s. Samal Builders Private Limited, a sub-contractor, faced a similar demand for the same work.

2. The main issue revolved around the classification of the construction activities for Service Tax purposes. The appellant argued that the construction of ash ponds constituted a dam, exempt from taxable services. However, the Commissioner held that the activities aimed at expanding an ash pond for pollution control did not fall under the definition of a 'dam.' The Tribunal found the services qualified as Industrial Construction Service, subject to Service Tax under 'Commercial or Industrial Construction Service.'

3. The appellant claimed that prior to March 2007, they believed they were not liable for Service Tax based on a clarification from the authorities. They also argued that the demand should be time-barred due to the introduction of 'works contract service' in June 2007. The Tribunal considered these arguments but directed the principal contractor to deposit a reduced amount based on abatement notifications.

4. The liability of the sub-contractor, M/s. Samal Builders Private Limited, for Service Tax was also discussed. The Tribunal deferred a decision on their pre-deposit requirement, indicating it would be addressed during the appeal hearing along with the principal contractor's case.

5. The judgment referred to various judicial pronouncements cited by the counsels, emphasizing the denial of Service Tax liability by both the principal contractor and the sub-contractor. The Tribunal considered these precedents but ultimately ruled based on the specific facts of the case and applicable tax laws.

6. In conclusion, the Tribunal directed the principal contractor to make a reduced pre-deposit, with the balance amount of Service Tax, interest, and penalties waived upon compliance. The appeals of both companies were to be heard together for final resolution, ensuring a comprehensive review of the tax liabilities and legal arguments presented by all parties involved.

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