2018 (9) TMI 1073 - AT - Service Tax

Nature of Services rendered by appellant - Erection, commissioning and installation Services or not? - appellant were awarded a contract from Delhi Metro Rail Corporation Limited (DMRC) for design of rail based mass rapid transport system by procuring the design, execution and completion and remedying any defects in the works of civil engineering contraction, mechanical and electrical installation of the station (including tunnel ventilation and station area conditioning and ventilation) and tunnel infrastructure and buildings. Held that - The Erection, Commissioning or Installation is one of the activity for the impugned contract which is composite in nature, i.e. having other services, in addition, to be simultaneously provided for. A close look at Finance Act, 1994 would show that the five taxable services referred to in the charging Section 65(105) would refer only to service contract simpliciter and not to the composite work contracts. This is clear from the very language of Section 65(105) which defines taxable service as any service provided . All the services referred to in the said sub-clauses are service contract simpliciters without any other element in them. Further, under Section 67 of the Act, the value of taxable service is the gross amount charged by the service provider for such service rendered by him. In the case before us, there is a contract (Design and Construct Contract) by Delhi Metro Rail Corporation in favour of the appellants for the design and construction of a rail based mass rapid transport system by procuring the design, execution and completion and remedying any defect in the works of civil engineering, construction, mechanical and electrical installations of the stations (including tunnel ventilation and station air conditioning and ventilation) and tunnel infrastructure and buildings. The perusal of contract shows that it was the obligation of appellants only to supply/provide all equipments, materials, labour and other facilities requisite for and incidental to the successful completion of the works and in carrying out all duties and obligations imposed by the contract documents - thus, the contract is composite in nature rather being the contract for service simpliciter. The taxability of composite contracts was brought into tax net w.e.f. 01.06.2007 itself under the category of rendering services of work contract taxable under Section 65(105) zzzza of the Act. Time Limitation - Held that - The Order under challenge is absolutely silent about any positive act on part of the appellant which may entitle the Department to invoke the extended period of limitation - the Show Cause Notice in this case is otherwise barred by limitation. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Classification of services provided by the appellant.
2. Applicability of service tax exemption.
3. Nature of the contract as composite or service simpliciter.
4. Applicability of extended period for issuing the Show Cause Notice.
5. Exclusion of railways from the tax ambit.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Appellant:
The appellant, a joint venture company, was engaged in the construction of a metro corridor and was alleged by the Department to be involved in the erection, commissioning, and installation services. The Department issued a Show Cause Notice demanding service tax for these activities. The appellant contended that their services fell under the category of "work contracts," which were only taxable from 01.07.2007, and not under "erection, commissioning, or installation services."

2. Applicability of Service Tax Exemption:
The appellant argued that their activities related to the construction of the metro corridor were exempt from service tax under the category of Construction Services as per Circular No. 80/2004 dated 17.09.2004. They also highlighted that construction of railways, including metro corridors, was excluded from the taxability of Construction Services.

3. Nature of the Contract as Composite or Service Simpliciter:
The Tribunal analyzed the contract and determined that it was a composite contract that included various activities such as design, construction, mechanical and electrical installations, and more. The Tribunal referred to the definitions under the Finance Act, 1994, and previous judgments, including the Supreme Court's decision in Larsen & Toubro Ltd. Vs. State of Karnataka, to conclude that the contract was composite in nature and not a service simpliciter.

4. Applicability of Extended Period for Issuing the Show Cause Notice:
The Show Cause Notice was issued beyond the normal period of one year. The Tribunal emphasized that for invoking the extended period, the Department must prove willful suppression or intent to evade tax. The Tribunal found no evidence of such intent or suppression by the appellant and held that the extended period could not be invoked in this case, making the notice time-barred.

5. Exclusion of Railways from the Tax Ambit:
The Tribunal referred to various judgments, including those of the Supreme Court and High Courts, which classified metro work as railway work. The Tribunal concluded that the construction of the metro corridor fell within the exclusion clause for railways under the definition of work contracts, thus exempting it from service tax.

Conclusion:
The Tribunal held that the services provided by the appellant were part of a composite work contract, which was not taxable prior to 01.07.2007. The Tribunal also noted that the construction of the metro corridor was excluded from the tax ambit as it was considered railway work. Additionally, the Show Cause Notice was deemed time-barred due to the lack of evidence for invoking the extended period. Consequently, the Tribunal set aside the Order under challenge and allowed the appeal.

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