2018 (2) TMI 229 - AT - Service Tax

Classification of services - activity of installation of wired line and cables - whether classified under Commissioning and Installation Service or otherwise? - Held that - The basic activity of the appellant is installation of wiring and wire line, broad band and cables. The activities undertaken pursuant to the agreement dated 1.4.2003 will not fall under the category of installation of land, machinery, equipment as contained in the definition under Section 65(39a) of Finance Act, 1994 - Since the activity of the appellant cannot be categorised under simple installation of equipment, and more precisely falls under installation of wiring or fittings as contained in the amended definition with effect from 16.6.2005, the classification should be appropriately made under the amended definition effective from 16.6.2005. Circular No. B-I/6/2005-TRU, dated 27.7.2005, clarifies that scope of the taxable service has been expanded by including specified services therein. Since the scope of the taxable service was expanded and in view of the fact that the activity undertaken by the appellant is more specific to wirings or fittings of the equipment, such taxable service should be covered under the amended provisions of erection, commissioning and installation service with effect from 16.6.2005. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of service for service tax liability based on the effective date of the relevant entry in the statute book.

Analysis:
The appellant, engaged in the installation of wired line and cables, was classified by the Department under the taxable category of "Commissioning and Installation Service," with service tax demand confirmed from 1.7.2003. The appellant contended that they should only be liable to pay service tax from 16.6.2005, as the specific entry of "installation of electrical and electronic devices, including wiring or fittings thereof" was inserted in the definition clause on that date. The appellant argued that activities prior to this effective date should not fall under the taxable category. The Department, however, maintained that the appellant's activities fell under the category of installation service, making them liable for service tax from 1.7.2003.

Upon examination, it was found that the appellant's basic activity involved the installation of wiring and wire line, broadband, and cables. The agreement dated 1.4.2003 did not categorize the activities under the definition of "installation of land, machinery, equipment" as per the Finance Act, 1994. The specific entry of "installation of electrical and electronic devices, including wiring or fittings thereof" was introduced in the provisions with effect from 16.6.2005. Given that the appellant's activity aligned more closely with installation of wiring or fittings, the classification should be made under the amended definition effective from 16.6.2005. Additionally, Circular No. B-I/6/2005-TRU clarified the expansion of the scope of taxable services, including specified services. Considering the specific nature of the appellant's activity related to wirings or fittings of equipment, it was determined that the taxable service should be covered under the amended provisions of erection, commissioning, and installation service from 16.6.2005.

As a result, the demand confirmed by the lower authorities was deemed unsustainable. The impugned order was set aside, and the appeal was allowed in favor of the appellant.