2015 (12) TMI 749 - AT - Service Tax

Demand of service tax - penalties under Sections 76, 77 & 78 - commercial or industrial construction services - Held that - Activity undertaken by the appellant pertain to widening/construction/maintenance of roads, construction of toll plaza and sheds including high mast poles, construction of bridges, etc. Therefore, there was enough material available before the adjudicating authority to verify the exact nature of work undertaken and to see whether the same was taxable or not. We have perused the work orders submitted by the appellant and find that all these work orders pertain to construction/repairs/maintenance of roads, construction of toll sheds/plaza located in the road, civil works relating to irrigation dams and so on. All these activities have been retrospectively exempted either by way of notification or by means of a specific provision in the Finance Act itself and therefore, the activities undertaken by the appellant is either exempted or falls outside the purview of the taxable services. Therefore, the impugned demands are clearly not sustainable in law and have to be set aside. - Decided in favour of assessee.

Summary

Issues:
1. Confirmation of service tax demand and penalties under Sections 76, 77 & 78 of the Finance Act, 1994.
2. Classification of services under commercial or industrial construction services.
3. Exemption of services provided for construction and repair of roads and civil works in relation to irrigation schemes from service tax.

Analysis:
1. The appeal challenged the Order-in-Original confirming a service tax demand of Rs. 67,79,026 along with interest and penalties under Sections 76, 77 & 78 of the Finance Act, 1994. The appellant, M/s. Phoenix Engineering, contended that the demand pertained to services provided to various government agencies for construction and maintenance works. The appellant argued that most of the services, such as construction and repair of roads, fell under exemptions from service tax. The appellant presented work orders from the agencies as evidence and sought to set aside the demand.

2. The Additional Commissioner for the Revenue supported the findings of the adjudicating authority, stating that the appellant failed to provide sufficient documentary evidence to support their claim that the services rendered were exempt from taxation. The authority maintained that the nature of the work undertaken, including road construction, toll plaza construction, and civil works, justified the tax liability. However, upon review, the Tribunal found that the activities undertaken by the appellant, as evidenced by the work orders, were indeed related to exempted services such as construction, repairs, and maintenance of roads, toll plaza construction, and civil works for irrigation schemes. The Tribunal noted that these activities were either retrospectively exempted or explicitly excluded from taxable services, rendering the demand unsustainable in law.

3. The Tribunal emphasized that the work orders submitted by the appellant clearly indicated that the services provided were in line with the exemptions granted for construction and repair of roads and civil works related to irrigation schemes. Citing specific provisions and notifications exempting such activities, the Tribunal concluded that the impugned demands were legally unsustainable. Consequently, the Tribunal set aside the Order-in-Original, thereby allowing the appeal in favor of the appellant.