2015 (1) TMI 684 - AT - Service Tax

Waiver of pre deposit - Business of construction or execution of infrastructure projects - Works contract service - Held that - Appellants have undertaken only work relating to part of the pipeline and therefore it is difficult to call them Turnkey or EPC projects. Moreover it is also not clearly coming out that the design and engineering part of the project was completely executed by the appellant especially in view of the fact that only part of the pipeline was constructed by them. As regards civil construction work also, the contention of the appellant that just because a contract is termed as EPC or Turnkey project, the same cannot be held conclusively against the appellant. The contract has to be examined to see whether it is in reality an EPC project or not. Terms used in the contract should not be looked at in isolation or interpreted literally. If the contract is accepted literally and no examination is done in a holistic manner, it is quite possible that contracts can be termed in such a manner so as to ensure that appropriate terms are used so that tax liability is avoided. In view of the fact that two decisions of the Tribunal 2012 (6) TMI 165 - CESTAT, Bangalore and 2014 (10) TMI 132 - CESTAT BANGALORE prima facie have taken a view in favour of the assessees referred to by the learned counsel, we consider it appropriate that the same should be followed in this case also. As regards GTA service the appellants have deposited an amount of ₹ 30,00,000/- but we feel that this would not be sufficient for hearing the appeal. - Partial stay granted.

Summary

Issues:
1. Whether the appellant is liable to pay service tax for works contract service.
2. Whether the appellant is liable to pay service tax for GTA service.
3. Whether the requirement of pre-deposit of balance dues can be waived.

Analysis:
1. The appellant, engaged in construction of infrastructure projects for State Governments, was subjected to a confirmed demand for service tax amounting to Rs. 29,79,61,129/- for providing works contract service. The appellant argued that construction of pipelines for irrigation, when not for commerce or industry, is not taxable. Citing precedents, the appellant contended that the project nature and execution determine tax liability. The Tribunal observed that in cases where pipelines were constructed for non-commercial purposes, tax liability was not established. The Tribunal emphasized that contracts should be analyzed holistically, not just by terms used, to prevent tax avoidance. Relying on favorable decisions, the Tribunal waived the pre-deposit requirement for the balance dues.

2. Regarding the demand under GTA service, an additional amount of Rs. 34,63,237/- was imposed on the appellant. The appellant had already deposited Rs. 30,00,000/- and requested the waiver of the remaining amount due to strong merits on limitation grounds. The Tribunal found the deposited amount insufficient for the appeal hearing but granted a waiver of the balance dues contingent on the appellant depositing Rs. 5,00,000/- within 8 weeks.

3. The Tribunal, after considering arguments from both sides and relevant case laws, directed the appellant to comply with the deposit requirement of Rs. 5,00,000/- within a specified timeline. Upon compliance, the pre-deposit of balance dues was waived, and a stay against recovery was granted. The decision was pronounced in open court on a specified date.

This judgment clarifies the tax liability of the appellant for works contract service and GTA service, emphasizing the importance of project nature and contract analysis in determining tax obligations. The Tribunal's decision to waive the pre-deposit requirement showcases a balanced approach considering legal precedents and the specific circumstances of the case.