2021 (12) TMI 338 - AT - Service Tax

Classification of services - erection of girders used in the construction of roads and bridges with the help of labour and equipment - supply of tangible goods services or not - Board s Circular No. 80/10/2004-ST dated 17.9.2004 and Circular No. B-I/6/2005-TRU dated 27.7.2005 - HELD THAT - The work order issued by M/s Vijay Nirman Company Private Limited gives the discussion of work as erection of 408 Nos. of PSC girder of 39 M. length at 153 KM interchange of Yamuna Expressway Project, Agra (UP) by providing cranes, manpower, tools and tackles including transportation of the same from casting yard of PCEPL to erection location at site. The work order issued by M/s L T Company describes the work as erection services and the payment in both the cases was linked to the number of girders erected. On going through the work contracts, the work performed by the appellants is essentially erection of girders. For this purpose, they may have used/mobilized equipment/labour. It is not coming forth from the work orders that the work orders were for supplies of any cranes or equipments. The tenor of the contract is certainly for erection of girders. The payment terms also, are not for the lease out or supply of equipment so as to be categorized the service in the supply of tangible goods. The words by providing appearing in the contract should be harmoniously read with the other terms of the contract. Even on a plain reading of the description of item, it is clear that the contract is for erection of girders only and it is also mentioned that the requisite equipment, labour, transportation etc. will be managed by the appellant themselves. Education Guide of Service Tax Department clarifies that however, a sub-contractor providing services by way of works contract to the main contractor, providing works contract services, has been exempted from service tax under the mega exemption if the main contractor is engaged in providing exempt services of work contracts. It is not the case of the Revenue that the clients of appellants have not rendered services in the construction of roads and bridges. On this count also, the Revenue s contention that the appellants provided supply of tangible goods services is not tenable. The impugned order does not survive on merits and is liable to be set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of service tax provisions regarding "supply of tangible goods services" in the context of construction contracts.

Analysis:
The case involved a dispute regarding the nature of services provided by the appellant, a company engaged in the erection of girders for roads and bridges. The Department alleged that the appellant was involved in the "supply of tangible goods services" during certain years and issued a show cause notice leading to an adjudication order challenged in this appeal.

The appellant argued that their work primarily involved the erection of girders, which is an exempted service related to construction of roads. They relied on circulars to support their position and cited relevant case law to emphasize the nature of their services as distinct from supply of tangible goods.

The Revenue contended that the services provided by the appellant met the criteria of "supply of tangible goods" as the control and possession of cranes remained with the operator. They presented various circulars, notifications, and judgments to support their argument.

After hearing both sides and examining the work orders issued by clients, the Tribunal found that the appellant's work primarily focused on the erection of girders, with payments linked to the number of girders erected. The terms of the contracts indicated that the services were for erection of girders and not for the supply of equipment. The Tribunal concluded that the Revenue's interpretation based on the phrase "providing cranes" in the work orders was not sufficient to categorize the services as supply of tangible goods.

Additionally, the Tribunal noted that the Education Guide clarified exemptions for subcontractors providing works contract services, which further supported the appellant's position. The Tribunal distinguished the case law and circulars relied upon by the Revenue, stating that they were not applicable to the facts of the case.

Ultimately, the Tribunal allowed the appeal, setting aside the impugned order on the grounds that the services provided did not qualify as "supply of tangible goods services" under the relevant provisions of the service tax law.

This detailed analysis of the judgment highlights the key arguments, interpretations of legal provisions, and the Tribunal's reasoning leading to the decision to allow the appeal.