2019 (7) TMI 503 - AT - Service Tax

Consulting Engineer service - Non-payment of service tax - Appellant is collecting erection and commissioning charges which were shown under job work receipts and the same are chargeable to service tax w.e.f. 1.7.2003 - demand alongwith interest and penalty - period 1.7.2003 to 9.9.2004 - demand under Works contract service for the subsequent period - Change in classification of services - Scope of SCN. HELD THAT - The Appellants during this period were engaged in the erection of transmission towers. The facts of the case show that the Appellant during the relevant period, were engaged in the supply of electricity transmission towers as well as rendering services of erection of the same. Such services would undoubtedlymerit classification under Works Contract Service. From the assessment order passed by the VAT authorities for the impugned period, it is found that the Appellant s services were classified under Works Contract under Gujarat VAT. The Hon ble Apex Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT has held that Works contracts are not liable for service tax for the period prior to 01.06.2007. Also by virtue of Notification No. 45/2010-ST dated 20.7.2010, exemption was granted from payment of service tax to any service in relation to transmission and distribution of electricity - Undoubtedly the services rendered by the Appellant were related to erecting towers for transmission of electricity and hence merits exemption by virtue of subject Notification. During the impugned period, the activity of only commissioning and installation was taxable and only from 10.9.2004, the services of erection were included /adduced to commissioning and installation service so as to make the same taxable. The same is explicit from the CBEC Circular No. 59/8/2003-ST dated 20.6.2003. Demand under Works contract service for the subsequent period - for the subsequent period, the Revenue authorities have themselves classified the service under the category of works contract for the same activity - HELD THAT - In view of facts of the case, the Hon ble Apex Court order in COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT and Tribunals order as well as CBEC circulars, Notifications issued under Section 11-C of Central Excise Act, we hold that the services of erection rendered by the Appellant during the impugned period are not liable for service tax. Change in classification of services - scope of SCN - HELD THAT - In the show cause notice, the demands were made under the category of Consulting Engineer, whereas in the impugned order, the demands were made under the category of erection services, which amounts to change of classification. Clearly, the demand has traveled beyond the scope of show cause notice as no demands were made under the category of erection service - for this reason also demand is not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Classification of services provided by the Appellant.
2. Taxability of services under the Finance Act, 1994.
3. Applicability of exemption notifications.
4. Sustainability of the demand and penalty imposed.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Appellant:
The Appellant, engaged in the erection, commissioning, and installation of transmission line towers, was initially classified under "Consulting Engineer" services. However, the adjudicating authority reclassified these services under "Erection & Commissioning Services" for the period 1.7.2003 to 9.9.2004. The Appellant argued that their activities fell under "Works Contract" and were not taxable prior to 1.6.2007, relying on the Supreme Court judgment in Larsen & Toubro Ltd (2015). The Tribunal found that the Appellant's services were indeed classified under Works Contract under Gujarat VAT and upheld that works contracts were not liable for service tax before 01.06.2007.

2. Taxability of Services Under the Finance Act, 1994:
The Tribunal referenced the Hon’ble Supreme Court's findings in Larsen & Toubro Ltd, which clarified that the Finance Act, 1994, did not charge works contracts to service tax prior to 01.06.2007. The court emphasized that the Finance Act’s provisions pertained to service contracts simpliciter and not composite works contracts. Consequently, the Tribunal concluded that the Appellant's services during the impugned period were not taxable.

3. Applicability of Exemption Notifications:
The Appellant cited Notification No. 45/2010-ST dated 20.07.2010, which exempted services related to the transmission and distribution of electricity from service tax. The Tribunal confirmed that the Appellant's services, being related to the erection of electricity transmission towers, were exempt under this notification. The Tribunal also referenced multiple judgments, including Noida Power Co. Ltd (2014) and Paschimanchal Vidyut Vitran Nigam (2012), which supported the exemption of such services from service tax.

4. Sustainability of the Demand and Penalty Imposed:
The Tribunal observed that the demand was initially proposed under "Consulting Engineer" services but was confirmed under "Erection & Commissioning Services," amounting to a change in classification. This change was beyond the scope of the show cause notice, rendering the demand unsustainable. The Tribunal cited judgments from the Supreme Court and Gujarat High Court to support this view. Consequently, the Tribunal held that the demand and penalty against the Appellant were not sustainable and set aside the impugned order, allowing the appeal with consequential reliefs.

Conclusion:
The Tribunal concluded that the services rendered by the Appellant during the impugned period were not liable for service tax, and the demand and penalty imposed were not sustainable. The appeal was allowed with consequential reliefs.