2018 (10) TMI 218 - AT - Service Tax

Erection, commissioning and installation services - services provided to Jaipur Vidhyuth Vitharan Nigam Limited (JVVNL), Jaipur - Providing & Fixing of Street Lights on PCC Pole or otherwise i.e. work in relation to lighting on public utility road - Electrification and Lighting - Shifting of overhead cables/ wires and laying of cables under or alongside roads - CBEC Circular No. 123/5/2010-TRU dated 24th May, 2010 - Composition Scheme - Composite Work Contract prior to 1st June, 2007 - time limitation. Taxability - Providing & Fixing of Street Lights on PCC Pole or otherwise i.e. work in relation to lighting on public utility road - Electrification and Lighting - Shifting of overhead cables/ wires and laying of cables under or alongside roads - Held that - Applying the Circular to the services still confirmed by the adjudicating authority below, we observe that the providing and fixing of streetlights is taxable. Therefore, the demand for the said category is held to have rightly been confirmed - Electrification is covered under clause 7 of the above Circular as taxable work. Therefore, this demand is also held to have rightly been confirmed - However, shifting of overhead cables/ wires or along side roads for any reason as widening/renovation of the roads is specifically not taxable as per entry No.1 of the said Circular. Benefit of Composition Scheme and cum-tax benefit - Held that - The work orders are perused. It becomes clear that these are not the work orders for the services simplicitor or for sale of goods simplicitor but involves both the elements in such a manner that the contracts are indivisible - the contracts are opined to fall under the category of works contract services. It has also been observed that the introduction of work contract service came w.e.f. 1st June, 2007. Even the adjudicating authority has acknowledged the activity of the appellant to be covered under para (a) & (e) of sub clause (ii) of the definition of works contract service. But despite the said findings, the Commissioner is opined to have committed an error while holding that with the introduction of work contract service classification of certain services could undergo a change and merely because certain services got covered under works contract service, it does not necessarily mean that the same service was not classifiable under any other pre-existing taxable category i.e. errection, commissioning or installation services. Composite Work Contract prior to 1st June, 2007 - Held that - The service which is in the nature of Composite Work Contract cannot be put to tax before 1st June, 2007. Hence, the entire demand confirmed by the adjudicating authority for the period prior to 2007 is held to have wrongly confirmed. The same is hereby set aside. However, for the subsequent period, since the activity is work contract service and there is a Composition Scheme as per the provisions of Composition Rules issued under Notification 32/2007 dated 22nd May, 2007 vide which an option is available to pay Service Tax at the rate of 2 % upto 1st of March, 2008 and at the rate of 4 % w.e.f. 1st of March, 2008 on the gross amount charged for the works contract instead of paying the regular duty. The appellant is entitled to opt for Composition Scheme. The said benefit is denied by the adjudicating authority below merely on the ground that the appellant has failed to exercise the said option prior to the payment of Service Tax in respect of the respected works contract, but to our opinion, that is merely a procedural lapse - Otherwise also Composition Scheme is a beneficial legislation and the inclination shall always be in favour of the assessee in case of any legislation benefiting him. The commissioner is therefore opined to have committed a mistake while declining the said benefit. But, simultaneously it is also apparent on record that the regular duty applicable was 10.3% whereas the appellant has paid the said duty at the rate of 12.3%. This means that the appellant opted to not to pay under Composition Scheme. Time limitation - Held that - Though the Department has taken the plea that there is a clear recital in the order under challenge about the appellant to have been non-cooperative while providing the documents but the meticulous table in the order itself falsifies that argument and there is observed no other act of appellant on record of alleged non-cooperation. Otherwise also the activity was of composite nature and was not simplicitor of errection, commissioning or installation - Hence, appellant is held to have a bonafide impression of no tax liability. As a result, the Department is held not liable to invoke the extended period of limitation. The confirmed demand can be confined only for the year 2009-10. The major drop of the demand otherwise has not challenged by the Department. The order with respect to the demand for the year 2009-10 as mentioned in chart in Order-in-Original except for the demand of ₹ 2,66,303/- for Railway, Ajmere is hereby upheld - Rest of the demand has though taxable but is hereby set aside being barred by time - Appellant is held to be entitled for the benefit of Composition Scheme but is observed to have not opted for it. Appeal allowed in part.

Summary

Issues Involved:
1. Liability to pay Service Tax on works contract services.
2. Applicability of CBEC Circular No. 123/5/2010-TRU dated 24th May, 2010.
3. Classification of services under erection, commissioning, or installation services.
4. Application of Composition Scheme and cum-tax benefit.
5. Limitation period for raising demand.

Detailed Analysis:

1. Liability to Pay Service Tax on Works Contract Services:
The appellants were engaged in providing erection, commissioning, and installation services but did not pay the appropriate Service Tax. An investigation led to a demand of ?12,56,44,634/- for the period 2005-06 to 2009-10, which was later reduced to ?1,34,66,803/- by the adjudicating authority. The appellants contested this demand, arguing that they were not liable to pay Service Tax based on CBEC Circular No. 123/5/2010-TRU. The adjudicating authority confirmed the demand for specific categories of work orders, which included providing and fixing street lights, electrification, and installation of transformers.

2. Applicability of CBEC Circular No. 123/5/2010-TRU dated 24th May, 2010:
The appellants argued that their activities were exempt from Service Tax as per the CBEC Circular. The circular clarified that activities such as shifting overhead cables, laying cables under or alongside roads, and laying electric cables between grids/sub-stations were not taxable. However, the adjudicating authority found that certain activities, like providing and fixing street lights and electrification, were taxable under the circular. The tribunal upheld the demand for these taxable activities but set aside the demand for non-taxable activities like shifting overhead cables.

3. Classification of Services under Erection, Commissioning, or Installation Services:
The adjudicating authority classified the appellant's services under erection, commissioning, or installation services. The tribunal observed that the contracts involved both services and the supply of goods, making them indivisible and falling under works contract services. The tribunal referred to the Supreme Court's decision in Commissioner of Central Excise & Customs, Kerala Vs. Larsen & Toubro Ltd., which clarified that works contracts encompass a wide range of contracts involving both goods and services.

4. Application of Composition Scheme and Cum-Tax Benefit:
The appellants claimed the benefit of the Composition Scheme and cum-tax benefit. The tribunal noted that the contracts were composite work contracts and could not be taxed before 1st June, 2007. For the period after 1st June, 2007, the appellants were entitled to opt for the Composition Scheme, which allowed paying Service Tax at a reduced rate. The tribunal found that the adjudicating authority erred in denying this benefit due to procedural lapses. However, since the appellants had paid the regular duty at a higher rate, no consequential benefit followed.

5. Limitation Period for Raising Demand:
The demand was raised for the period 2005-2010, but the show cause notice was issued on 22.10.2010. The normal period for raising the demand is one year, extendable in cases of wilful suppression or fraud. The tribunal found that the appellants had a bona fide impression of no tax liability based on the CBEC Circular and did not intentionally evade tax. Therefore, the extended period of limitation could not be invoked. The confirmed demand was confined to the year 2009-10, and the major drop in demand was upheld.

Conclusion:
The tribunal upheld the demand for the year 2009-10, except for ?2,66,303/- related to Railway, Ajmere, which was set aside. The rest of the demand was set aside as it was barred by time. The appellants were entitled to the benefit of the Composition Scheme but were found not to have opted for it. The appeal was partly allowed.