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2015 (8) TMI 640 - AT - Service TaxErection, Installation and Commissioning Service - installation of HVAC systems (air conditioning systems) - Works contract service - Date of taxability of service - Held that - The later circular makes it absolutely clear that the scope of ECIS was expanded by including specified installation services such as installation of air-conditioning including related pipe work, duct work and metal sheet work. Although Board circular is not binding on the quasi-judicial authorities, it is clear that the later circular of the Board dated 27.07.2005 in a way revised the opinion expressed in its earlier circular dated 21.08.2003. A careful perusal of definition of ECIS also reveals that sub-clause (i) is separated from sub-clause (ii) by or . Thus, clauses (i) and (ii) represent an either or situation, meaning thereby that what is covered in sub-clause (i) is not covered in clause (ii) and vice versa. So as installation of air-conditioning is expressely covered under clause (ii), it cannot be covered under clause (i) and as clause (i) covers everything covered by the definition of ECIS prior to 16.06.2005. it was outside the scope thereof - when, clause (i) of ECIS definition with effect from 16.06.2005 covered everything which was covered by definition of ECIS prior to 16.06.2005. it has to be held that what is contained in clause (ii) of the ECIS definition was not covered under the ECIS definition prior to 16.06.2005. - impugned demand under ECIS which pertains to the period prior to 16.06.2005 is not sustainable as installation of air-conditioning was not covered under ECIS prior to 16.06.2005. - Decided against Revenue.
Issues:
1. Demand of service tax under "Erection, Installation and Commissioning Service" in relation to HVAC systems. 2. Applicability of service tax under works contract service. 3. Scope of penalty under Section 78 of the Finance Act, 1994. 4. Interpretation of the definition of "erection, commissioning or installation" under ECIS. 5. Impact of Board Circulars on the interpretation of ECIS definition. Analysis: 1. The appeal was against the demand of service tax under "Erection, Installation and Commissioning Service" (ECIS) for HVAC systems. The Commissioner upheld the demand but dropped the penalty due to doubts regarding the levy of service tax under ECIS. The appellant argued that the service was under works contract service, which was taxable only from 01.06.2007, and that the HVAC system installation was not covered under ECIS during the relevant period. The Departmental Representative contended that the service fell under the definition of ECIS before 16.06.2005. The Tribunal examined the contracts and referred to a previous CESTAT decision on works contracts' taxability. The Tribunal held that doubts about taxability prior to 01.06.2007 justified dropping the penalty under Section 78. 2. The Revenue appealed the dropping of the penalty under Section 78, citing wilful misstatement by the appellant. The Tribunal referenced a Supreme Court decision supporting the view that doubts about taxability preclude invoking the extended period under Section 11A, thus negating the penalty under Section 78. The Show Cause Notice's issuance before 19.07.2005 also rendered part of the demand time-barred. 3. The appellant contended that the installation of air-conditioning became taxable under ECIS only from 16.06.2005. The Tribunal analyzed the definitions of ECIS before and after 16.06.2005. It concluded that the installation of air-conditioning was not covered under ECIS before 16.06.2005, based on the expanded scope of ECIS post-16.06.2005. The Tribunal referenced Board Circulars to support this interpretation, emphasizing that the later circular revised the earlier opinion, and the expanded scope excluded pre-16.06.2005 installations from ECIS. 4. Referring to a CESTAT decision, the Tribunal held that the introduction of a new tariff entry implies areas not covered by the earlier entry. Therefore, what was covered under the new ECIS definition post-16.06.2005 was not included in the pre-16.06.2005 definition. Consequently, the demand under ECIS before 16.06.2005 was deemed unsustainable due to the non-coverage of air-conditioning installation. 5. In conclusion, the Tribunal allowed the appellant's appeal and dismissed the Revenue's appeal, emphasizing the non-sustainability of the demand under ECIS pre-16.06.2005 due to the exclusion of air-conditioning installation from the definition.
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