2017 (5) TMI 886 - AT - Service Tax

Erection, Commissioning or Installations service - appellants are involved in laying electrical cables along side roads and providing single point light fitting at the houses of beneficiaries under Kutir Jyoti Yojna/Scheme of the Government of Rajasthan - whether the appellant liable to pay tax under the entry Erection, Commissioning or Installations service? - Held that - the contracts executed by the appellants are composite in nature with supply of materials also. As such, the appellants are not liable to service tax for the period prior to 1.6.2007 - Even for the period after 1.6.2007, we note that the activities carried out by the appellant viz. laying of cables under or along side of roads and laying of electrical cables upto the distributions points of residential or commercial locations or complexes, are clarified to be not liable to any tax as per the Board s Circular dated 24.05.2010 - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Applicability of service tax under "Erection, Commissioning, or Installation Services" for activities involving laying electrical cables and providing single point light fitting.

Analysis:
The appeal challenged an order by the Commissioner (Appeals-I), Jaipur, regarding the tax liability of the appellants providing services to M/s. Rajasthan Vidyut Nigam Ltd. The dispute centered around whether the activities of laying electrical cables along roads and providing light fittings fell under the category of "Erection, Commissioning, or Installation Services" as per the Finance Act, 1994. The lower authorities had upheld the demand for service tax based on this categorization.

The appellant's counsel argued that the activities were not taxable under the specified tax entry and cited a Board circular from 2010 for support. Additionally, it was contended that the contracts executed by the appellants involved both material supply and service provision, making them non-liable for service tax before June 1, 2007, following a precedent set by the Supreme Court in Larsen & Toubro Ltd. v. State. The focus of the appeal was specifically on the tax liability related to "Erection, Commissioning, or Installation Services."

The appellate tribunal carefully considered both parties' arguments and examined the appeal records. It was established that the contracts were composite in nature, involving material supply alongside services. Consequently, the appellants were found not liable for service tax before June 1, 2007, in line with the Supreme Court's ruling. Moreover, even for the period post-June 1, 2007, the tribunal noted that the activities undertaken by the appellants, such as laying cables along roads and up to distribution points, were exempt from taxation as per a Board circular issued on May 24, 2010.

After thorough analysis, the tribunal concluded that the order concerning the service tax liability under "Erection, Commissioning, or Installation Services" was unsustainable. The appellants were not disputing their tax liability in other categories as confirmed by the lower authorities. Therefore, the impugned order was set aside in part, and the appeal was allowed.