2019 (11) TMI 1584 - AT - Service Tax

Works Contract - constitutional prerogative accorded to the supreme legislature - scope of encroachment by tax administration - HELD THAT - The generic expression transport terminal must be read in the context of its usage for servicing means of public transport. While airports may have been enumerated separately in the exclusions within the taxable entry, it too is a transport terminal as the distinguishing characteristic of such facilities is connectivity, interface and buffer. It is for the last of these, viz., buffer for stepping up or stepping down to capacity of the next level of interface, that space is constructed to offer a bouquet of services and goods to passengers during the waiting time. Therefore, the utilisation of built-up space by commercial entities does not detract from the essential purpose of such terminals and, traditionally, every bus terminal has outlets serving the passengers. In the absence of legislative intent or legislative delegation, an artificial delineation of space, at the discretion of tax authorities, is not acceptable. It is also specious to argue that absence or limits of security restrictions, unlike that elaborately designed, for obvious reasons at airports, should disentitle bus terminal from application as exclusion. Thus, terminals , such as the one impugned before us, are, in the absence of express legislative intent to limit application on the basis of scale of use or scale of access, within the ambit of exclusion from tax. Appeal allowed.

Summary

Issues involved:
Scope of adjudicating authority in interpreting the definition of 'taxable service' under Finance Act, 1994 for tax recovery.

Analysis:

1. The main issue in this appeal was the authority's scope to interpret the definition of 'taxable service' under the Finance Act, 1994 for tax recovery. The appellant, M/s. B.G. Shirke Construction Technology Pvt. Ltd., undertook a 'works contract' for constructing a 'Traffic and Transit Management Centre' at Shantinagar. The appellant contested the tax imposition by arguing that the activity did not fall under 'commercial or industrial construction' as per Section 65(105)(zzzza) of the Finance Act, 1994. The Hon'ble Supreme Court's decision in Commissioner of Sales Tax, Uttar Pradesh v. The Modi Sugar Mills Ltd. was cited to emphasize that taxing statutes must be interpreted based on the expressed words without any assumptions.

2. The jurisdictional officers sought to tax the entire project cost under the Finance Act, 1994, which was challenged by the appellant. The Commissioner confirmed the tax demand, interest, and penalty, leading to the appeal. The appellant argued that the project did not fall under the taxable category and that the exclusion for 'transport terminals' should apply, preventing tax recovery.

3. The contract awarded to the appellant was for a substantial amount, and the demand covered a specific period. The adjudicating authority considered the project's commercial occupancy as falling under 'construction for commerce or industry,' rejecting the appellant's arguments related to parking areas and leased spaces. The exclusion for airports was also discussed in comparison to the project.

4. The appellant contended that the contract was beyond the scope of taxable 'works contract service' as VAT liability was already discharged on the supplied materials. The appellant highlighted computational errors, the exclusion of the 'material' component from the contract value, and the denial of the 'composition' benefit. Limitation grounds were also raised against a significant portion of the demand.

5. The Tribunal's previous decision in a similar case clarified that charging rentals does not make an activity 'construction for commerce or industry.' The interpretation of 'transport terminal' was discussed in the context of public transport servicing, emphasizing connectivity and interface. The Tribunal found that the demand in the impugned order did not meet legal standards and thus allowed the appeal.

In conclusion, the Tribunal set aside the demand, emphasizing that the project did not fall under the taxable category as per the Finance Act, 1994. The decision was pronounced on 29-11-2019.