2018 (8) TMI 736 - AT - Service Tax

Commercial or Industrial Construction Service - activity of laying underground optical fiber cables for telecom companies like Reliance Communication, Vodafone Essar, BSNL and IDEA Cellular - Circular No 123 / 5/ 2010-TRU dated 24th May 2010 - Held that - The activities undertaken by the respondent to be akin to those mentioned at Sl No 2 & 3 in the table in the said circular. In respect of the said Sl No 2 & 3 it has been clarified that Not a taxable service under any clause of sub-section (105) of section 65 of the Finance Act, 1994 . Since it has been clarified by the Board that these services do not fall in the category of any taxable service defined by subsection 105 of Section 65 to the Finance Act, 1994, Commissioner (Appeal) has held accordingly. Revenue is not challenging the reliance placed by the Commissioner (Appeal) on the said circular, but it is challenging the order of Commissioner (Appeal) on the ground that the same has traveled beyond the scope of show cause notice as the issue was in respect of classification of services and admissibility of abatement under N/N. 1/ 2006-ST. - If some activity has been clarified to be not taxable, then revenue cannot take a stand that activity would fall under any taxable category, because of the reason that show cause notice raised dispute of classification. Revenue has in their appeal not even challenged the applicability of the said circular in the present case. It cannot be agreed with the findings of the adjudicating authority that the activity of laying optical fiber cable is different from the activity of laying electric cable . Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Commissioner (Appeal) traveling beyond the scope of show cause notice.
2. Classification of services as "Commercial or Industrial Construction Service" or "Erection, Commissioning and Installation Services."
3. Admissibility of abatement under Notification No 01/2006-ST.
4. Applicability of Circular No 123/5/2010-TRU dated 24th May 2010.

Analysis:

1. Commissioner (Appeal) Traveling Beyond Scope of Show Cause Notice:
The appeal by the revenue challenged the order of the Commissioner (Appeal) dated 10.09.2013, where the demand of ?42,73,752 in respect of taxable services under the category of "Commercial or Industrial Construction Service" was set aside. The issue raised was whether the Commissioner (Appeal) had exceeded the scope of the show cause notice, which primarily focused on the classification of services and the admissibility of abatement under Notification No 01/2006-ST. The Commissioner (Appeal) concluded that the activity undertaken by the appellant did not attract service tax, which the revenue found to be beyond the original issue raised.

2. Classification of Services:
The respondents were engaged in laying "underground optical fiber cables" for telecom companies and were initially discharging service tax liability under "Erection, Commissioning and Installation Services." However, during an audit, it was observed that the services provided were more appropriately classifiable under "Commercial or Industrial Construction Service." The issue revolved around the correct classification of the services provided and whether the respondents were entitled to the benefit of abatement under Notification No 01/2006-ST.

3. Admissibility of Abatement under Notification No 01/2006-ST:
The Commissioner (Appeal) set aside the demand for interest and penalties but upheld the demand for late fees under rule 7(c) of the Service Tax Rules, 1994. The appeal by the revenue challenged this decision, arguing that the extended period of limitation invoked was relevant despite the notice being issued within the normal period of limitation. The issue of abatement under Notification No 01/2006-ST was crucial in determining the tax liability of the respondents.

4. Applicability of Circular No 123/5/2010-TRU dated 24th May 2010:
The Commissioner (Appeal) heavily relied on Circular No 123/5/2010-TRU dated 24th May 2010 issued by the Central Board of Excise and Customs. The circular clarified the taxability of activities such as laying of cables under or alongside roads and provided insights into the classification under different taxable services. The Commissioner (Appeal) found that the activities undertaken by the respondents aligned with those mentioned in the circular, leading to the conclusion that they did not fall under any taxable service as defined by subsection 105 of Section 65 of the Finance Act, 1994.

In conclusion, the appeal filed by the revenue was dismissed as the Tribunal found no merit in the arguments presented. The decision was based on the interpretation of the circular, the scope of the show cause notice, and the classification of services, ultimately upholding the order of the Commissioner (Appeal) and disposing of the cross objection filed by the respondents.