2015 (9) TMI 259 - AT - Service Tax

Erection and Commissioning Service - Invocation of extended period of limitation - Held that - Appellant could have entertained a bonafide belief that as the activity undertaken by the appellant may not be covered under the category of erection and commissioning services and would be covered under the works contract which not in statue during the material period i.e 2006, they have not discharged the service tax under the category of erection and commissioning service. To that extent we hold that the demand for the period June and September 2006 is hit by limitation. As regards the demand within the limitation period i.e. November 2006 and September 2007, we upheld the same along with interest and also penalties imposable under the provisions but as per the settled law penalty equivalent to service tax liability are to be confirmed - Decided partly in favour of assessee.

Summary

Issues involved: Service tax liability under Erection and Commissioning Service for the period June 2006, September 2006, November 2006, and September 2007.

Analysis:
The appeal in question was against Order-in-Appeal AGS (169)31/09 dated 04.08.2009. The central issue revolved around the service tax liability concerning Erection and Commissioning Service for the amounts received by the appellant from Maharashtra State Electricity Board (MSEB) during specific periods. The appellant contended that the contract with MSEB was a works contract, leading them to believe that the activity of erection and commissioning service might not fall under the service tax purview. Reference was made to a judgment by the Larger Bench of the Tribunal in Larsen & Toubro Ltd., which held that service tax liability could be imposed even in the case of a works contract. The appellant also raised concerns about the limitation period, stating that the show-cause notice was issued on 29.01.2008, and the tax liability for June and September fell within the limitation period. Additionally, it was highlighted that the appellant did not obtain a registration certificate due to a genuine belief.

The Departmental Representative argued that the appellant did not disclose the activity to the department, justifying the invocation of the extended period for assessing the tax liability. After considering the arguments from both sides and examining the records, the Tribunal found that the issue was settled against the appellant based on the Larger Bench's decision in the Larsen & Toubro Ltd. case. However, concerning the demand for June and September 2006, the Tribunal acknowledged the appellant's genuine belief that the activity might not be categorized under erection and commissioning services during that period due to previous Tribunal decisions. Consequently, the demand for those months was deemed time-barred, leading to the appeal being allowed in that regard. As a result, the interest liability and penalties related to the time-barred demands were set aside. For the demands falling within the limitation period of November 2006 and September 2007, the Tribunal upheld the tax liability, interest, and penalties, with penalties equating to the service tax liability being confirmed as per established legal principles.

In conclusion, the appeal was disposed of with the demand for June and September 2006 being set aside due to limitation, while the demands for November 2006 and September 2007 were upheld along with applicable interest and penalties.