2015 (11) TMI 1351 - AT - Service Tax

Waiver of pre deposit - Denial of benefit of Notification No.16/2005-ST - benefit of Notification No. 16/2005 was denied only because the Jetty was for the private use of M/s RGPPL and not for common/general use of port facilities - Held that - In the said notification no distinction is sought to be made between a public port and a private port. The adjudicating authority cannot alter the amplitude of an exemption notification. Thus, the appellant has been able to make out a good case for full waiver of pre-deposit of demand (Rs.43,74,86,035/-) relating to CICS. Consulting Engineer Service - reverse charge mechanism - Held that - Prima facie the value of the goods supplied cannot be included in the value of service rendered by WOGL - once the goods are removed from the scope of work as per the sub-contract, the remaining will be a bouquet of services which taken in totality would be classifiable under CICS in terms of Section 65A ibid and not under Consulting Engineer Service as values of individual services are not ascertainable inasmuch as the payment is as per the milestone payment schedule attached to the sub-contract. However, we find that in the case of Alstom Projects India Ltd. (supra) it has been held that even such contracts can be vivisected. Although the ld. advocate for the appellant tried to distinguish the said judgement on the ground that in case of Alstom Projects India Ltd., it was admitted by the appellant that the milestone payments reflected the value of the goods or services rendered, no such admission exists in the present case, prima facie the judgement being on a similar issue at this interlocutory stage due weigtage has to be given to the said judgement for the purpose of determining the reasonable amount of pre-deposit. Prima facie the value of the goods has to be deducted to arrive at the value of the bouquet of services and the value of Consulting Engineer Service will be only a part of the value of such bouquet of services. Thus, we are of the opinion that while the appellant has not been able to make out a good case for full waiver of pre-deposit of the demand relating thereto Consulting Engineer Service specially in the wake of the judgement in the case of Alstom Projects India Ltd. (2011 (3) TMI 538 - CESTAT, NEW DELHI ), taking an overall view a pre-deposit of ₹ 1.3 crores will meet the requirement of Section 35F of the Central Excise Act, 1944 read with Section 83 of Finance Act, 1994. - Patial stay granted.

Summary

Issues:
1. Classification of services rendered by the appellant under Consulting Engineer Service.
2. Eligibility for exemption under Notification No. 16/2005-ST for Construction of Commercial or Industrial Construction Services (CICS).
3. Determination of pre-deposit amount for the demands under reverse charge mechanism.

Analysis:
1. The appellant argued that the services rendered by them were wrongly classified under Consulting Engineer Service by the adjudicating authority. They contended that the work done by them, particularly in relation to the construction of a Jetty, fell under commercial or industrial construction services. The appellant highlighted that the scope of work clearly indicated it was not consulting engineer service. The adjudicating authority had confirmed demands under the reverse charge mechanism. The appellant challenged this classification based on the nature of the services provided.

2. Regarding the demand related to CICS, the appellant contended that the service provided was in connection with the construction of a jetty and thus eligible for exemption under Notification No. 16/2005-ST. The appellant emphasized that the services were directly related to the construction of the port and should be exempt from the demands raised. The appellant presented arguments supporting their eligibility for the exemption under the notification.

3. The ld. DR argued that the services provided by the appellant fell under the scope of Consulting Engineer Service based on the components of the scope of work stipulated in the sub-contract. The DR cited a judgment to support the position that even contracts involving procurement of goods and construction could be vivisected for tax purposes. The issue of classification and valuation of the services under the reverse charge mechanism was discussed, considering the milestone payment schedule attached to the sub-contract.

4. The Tribunal analyzed the contentions of both sides and observed that the denial of the benefit of Notification No. 16/2005-ST was primarily due to the private nature of the Jetty for which the services were provided. The Tribunal noted that the exemption notification did not distinguish between public and private ports, and the appellant had a valid case for the waiver of the demand related to CICS. The Tribunal also considered the arguments regarding the classification and valuation of services under the reverse charge mechanism, taking into account the milestone payments and the judgment cited.

5. The Tribunal ordered a pre-deposit amount of Rs. 1.3 crores within a specified timeline, considering the analysis of the issues presented. The compliance with the pre-deposit was crucial for staying the recovery of the remaining adjudicated liability during the appeal process. Failure to comply would result in the dismissal of the appeal for lack of pre-deposit. The decision aimed to balance the interests of both parties while ensuring compliance with the legal requirements.