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2016 (12) TMI 485 - AT - Service TaxTurnkey contract - Erection Commissioning or Installation Services or under Commercial and Industrial Construction Services - Contract for providing and laying spiral welded/fabricated M.S. Pipe line for raising main and its allied works for Nerla lift irrigation scheme - including all related civil, mechanical and electrical works as per design and drawing, commissioning, testing of the entire pipe line and pumping machinery including maintenance for two years after completion of the scheme. - Held that - It can be noticed from the description of the work awarded to the appellant, it is a contract turnkey project which results in an erected structure with installation of pumping machinery, electrical switch yard and other related civil, mechanical and electrical structures, in our considered view would get covered under head Commercial and Industrial Construction Services. This specific issue was before the Larger Bench of the Tribunal in the case of Lanco Infratech Ltd. 2015 (5) TMI 37 - CESTAT BANGALORE (LB) , wherein the Larger Bench has settled that the law and held that irrigation projects/lift irrigation projects would get covered under CICS prior to January, 2007 but eligible for exemption. We also find strong force in the contention of the appellant that the issue is now covered under Hon ble Supreme Court in the case of Larsen & Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT , in the said case the Hon ble Apex Court was considering the same issue of vivisected contract for taxability under different categories. Whether the issue that the contract entered would get covered under Erection Commissioning or Installation Services was never before the lower authorities and hence the appellant should not be allowed to raise the same before the Tribunal is also dismissed as the Bench has recorded the finding on casual perusal of contract entered into is works contract wherein the appellant has used material in all the projects. Since the issue is question of law, in our opinion it can be raised before the Tribunal. The impugned order is set aside on merits itself. Since we are allowing the appeal on merits, we are not recording any observation on the various submissions made by both sides - appeal allowed - decided in favor of appellant-assessee.
Issues Involved:
1. Classification of services under Erection, Commissioning, or Installation Services (ECIS) versus Commercial and Industrial Construction Services (CICS). 2. Applicability of service tax on composite contracts. 3. Validity of the extended period for demand and penalties. 4. Correctness of quantification of demand. Issue-wise Detailed Analysis: 1. Classification of Services: The core issue was whether the appellant's activities fell under ECIS or CICS. The appellant was awarded a contract for laying a pipeline and associated works for an irrigation scheme. The department classified it under ECIS, attracting service tax. The appellant contended it should be classified under CICS, which was eligible for exemption. The Tribunal noted that the work involved a turnkey project, including civil, mechanical, and electrical works, aligning with CICS. The Tribunal referenced the Larger Bench decision in Lanco Infratech Ltd., which held that such projects fall under CICS and are exempt from service tax if for non-commercial purposes. 2. Applicability of Service Tax on Composite Contracts: The Tribunal examined whether the contract was a composite works contract. Citing the Supreme Court's judgment in Larsen & Toubro Ltd., it was emphasized that Section 65(105) of the Finance Act, 1994, refers to service contracts simpliciter, not composite contracts. The Tribunal concluded that the appellant's contract was a composite works contract, not merely a service contract, thus not taxable under ECIS. 3. Validity of the Extended Period for Demand and Penalties: The appellant argued that the extended period for demand was unsustainable as the issue involved interpretation of law. The Tribunal agreed, noting that the dispute was a matter of legal interpretation, making the invocation of the extended period and penalties under Sections 77 and 78 of the Finance Act, 1994, unwarranted. The Tribunal also mentioned that the appellant was entitled to the benefit of Section 80 of the Act, which provides relief from penalties in cases of reasonable cause. 4. Correctness of Quantification of Demand: The appellant challenged the quantification of the demand, arguing it was erroneous. The Tribunal did not delve deeply into this issue since it allowed the appeal on merits, setting aside the impugned order. However, it acknowledged the appellant's contention that the quantification was flawed. Conclusion: The Tribunal set aside the impugned order, holding that the appellant's activities were classifiable under CICS and not ECIS. It emphasized that the contract was a composite works contract, exempt from service tax. The Tribunal dismissed the department's argument that the issue of classification under ECIS was not raised before lower authorities, stating that it was a question of law that could be raised at any stage. The appeal was allowed on merits, and the Tribunal did not make any observations on the various other submissions made by both sides.
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