2022 (7) TMI 1183 - AT - Service Tax

Levy of Service Tax - Erection, Commissioning or Installation service or not - sub-contractor of L T Ltd in respect of Flyover/Bridge, Railway etc - sub-contractor of Techno Fab L T in respect of fabrication of various steel structures - sub-contractor of Geodesic Techniques in respect of Airport - fabrication of Hulls/ Parts of body of Ships, etc for ABG Shipyard Ltd - sub-contractor of L T, activity of construction in SEZ unit of Reliance Petroleum Ltd, Jamnagar and in SEZ unit of Reliance Oil Gas Terminal, Kakinada - Extended period of limitation - Jurisdiction - HELD THAT - It emerges that the appellant undertook the activity of fabrication of various structural items as sub-contractor of L T, Techno Fab ABG Shipyard. It also emerges that the said activity of fabrication of structural items viz. beams structs, pylons etc was carried out at various places in India in respect of Flyover, Bridges, Railway and Airport. Fabrication of structural items viz beams, structs, pylons etc which would become part of civil structure viz. Flyover/Bridge etc would therefore fall within the definition of taxable service of Commercial or Industrial Construction Service as given in Section 65 (25b) of the Finance Act 1994 which specifically excluded service in respect of Bridges, Railways, Airport etc from the tax net. Flyovers/Bridges cannot be equated with Plant, Machinery and Equipment. Therefore, activity undertaken by the Appellants would not fall within the definition of Erection, Commissioning or Installation under Section 65 (39a) as in force during 2004-05 and 2005-06 which covered Erection, commissioning or installation of Plant, Machinery or Equipment. The impugned orders vide which it is held that work undertaken by the Appellant in relation to Bridges, Rails, Airport etc was of only fabrication of various beams, structs, pylons etc and does not amount to undertaking of work of Civil construction is not tenable as fabrication of various Beams, Struts, Pylons, etc is indeed part of Civil construction and hence fall under the definition of Commercial or Industrial Construction Service as given in Section 65 (25b) of the Finance Act 1994 which excludes from its purview services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams and hence not taxable. Whether the activity of undertaking fabrication of steel structures out of the raw materials of clients is taxable under erection, commissioning and installation services ? - HELD THAT - There is no dispute to the fact that the appellant undertook fabrication of steel structures using raw material of clients viz Techno Fab and L T Ltd. The said activity was thus in the nature of job-work activity of production on behalf of clients; and as steel structures are excisable goods liable to duty, the same was not liable to service tax - Even if the said job work activity of production amounts to rendering of service, it would at best be Business Auxiliary Service covered under Section 65 (19) (v) of Finance Act 1994 and exempted under Notification No.8/2005-ST dated 1-3-2005. It is not in dispute that the production was done with materials of the clients at their site and therefore Notification No.8/2005-ST is satisfied. Even if the said exemption is to be held to be inadmissible there is no demand for Service tax in the Show Cause Notice under Business auxiliary service. The demand in the Show Cause Notice is under Erection, Commissioning or Installation, which is clearly not tenable. Levy of service tax - fabrication of Hulls/ Parts of body of Ships, etc for ABG Shipyard Ltd. - HELD THAT - It is an admitted position in the Show Cause Notice that the Annual reports of the Appellant do not show any receipt of any amount from ABG Shipyard Ltd. This clearly shows that Appellant has not undertaken any fabrication work for ABG Shipyard. The Show Cause Notice has demanded service tax from the Appellant on payments made by ABG Shipyard to a firm other than the Appellant, having the same name as the Appellant. It is available from the records that Form 16A issued by ABG Shipyard shows payment to M.K. Enterprise with PAN AACPZ5313R, which is not PAN of the Appellants proprietor. This aspect has not been rebutted by the Commissioner in his Order. Hence service tax demand on the fabrication of Hull/parts of body of ships, etc from ABG Shipyard Ltd cannot be sustained. Extended period of limitation - HELD THAT - Unless there is evidence of suppression of facts or contravention with intent to evade payment of service tax, larger period of limitation of 5 years specified in the Proviso to said Section 73 (1) is inapplicable. It appears that non-payment of service tax could be on account of the belief that no service tax was payable in respect of the activities undertaken by the Appellants; that the very fact that various decisions of Tribunal referred to herein above have also held that no service tax is payable on activities such as those undertaken by the Appellants, itself shows that the Appellants belief was reasonable and bona fide. It is settled law that where demand has been worked out based on the records of maintained by the assessee and where non-payment of service tax is on account of bona fide belief that no service tax was payable, the larger period of limitation cannot apply. The Larger Bench recently by its decision in COMMISSIONER OF SERVICE TAX VERSUS MELANGE DEVELOPERS PVT. LTD. 2019 (6) TMI 518 - CESTAT NEW DELHI decided the said issue, it is settled law that where the issue has not been free from doubt requiring reference to Larger Bench, the larger period of limitation cannot apply. Accordingly the demand for the extended period is not sustainable on limitation also. Jurisdiction - HELD THAT - It is seen that appellant have obtained registration from 2007 and hence Commissioner of Central Excise Service Tax, Surat may have jurisdiction to demand tax for the period after the date of registration in respect of services provided outside his jurisdiction, however the tax demand is not sustainable on merits and on limitation the said issue is of only academic importance. Hence we are not giving our conclusive finding on this issue of jurisdiction. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Liability to pay service tax under "Erection, Commissioning or Installation" services.
2. Classification of services as "Commercial or Industrial Construction Service".
3. Fabrication of steel structures and its taxability.
4. Applicability of Business Auxiliary Service exemption.
5. Fabrication of Hulls/Parts of body of Ships for ABG Shipyard Ltd.
6. Limitation period for service tax demand.
7. Jurisdiction of the Commissioner of Central Excise, Surat.

Detailed Analysis:

1. Liability to Pay Service Tax under "Erection, Commissioning or Installation" Services:
The demand for service tax was based on the appellants' Annual Report/Audit Report, which described their business as Erection and Commissioning Contractor. However, the show cause notice did not examine individual sub-contracts or work contracts to determine if they met the definition of "Erection, Commissioning or Installation" under Section 65 (39a) of the Finance Act 1994. The tribunal found that the activities undertaken by the appellants, such as fabrication of structural items for flyovers, bridges, and railways, did not fall under this category as they were part of civil construction and excluded from service tax.

2. Classification of Services as "Commercial or Industrial Construction Service":
The appellants argued that their activities fell under "Commercial or Industrial Construction Service" as defined in Section 65 (25b) of the Finance Act 1994, which excludes services related to bridges, railways, and airports from the tax net. The tribunal agreed, noting that fabrication of beams, struts, and pylons for bridges and railways is part of civil construction and thus not taxable. This was supported by judgments such as Jagdish Prasad Agarwal v. CCE and Pioneer Fabrications P. Ltd v. CCE.

3. Fabrication of Steel Structures and Its Taxability:
The appellants' fabrication of steel structures using clients' raw materials was considered a job-work activity and not liable to service tax under "Erection, Commissioning and Installation". The tribunal cited several decisions, including Hazi Ap Bava & Co v. CCE and Neo Structo Construction Ltd v. CCE, which held that such fabrication is not taxable as it amounts to manufacturing excisable goods.

4. Applicability of Business Auxiliary Service Exemption:
Even if the job work activity was considered a service, it would fall under "Business Auxiliary Service" as per Section 65 (19) (v) of the Finance Act 1994 and was exempted by Notification No. 8/2005-ST dated 1-3-2005. The tribunal found that the appellants met the conditions for this exemption, and there was no demand for service tax under this category in the show cause notice.

5. Fabrication of Hulls/Parts of Body of Ships for ABG Shipyard Ltd:
The tribunal found no evidence that the appellants undertook fabrication work for ABG Shipyard Ltd, as the show cause notice did not show any receipt of payments from ABG Shipyard. The demand was based on payments made to another firm with a similar name. Therefore, the service tax demand on this ground was not sustainable.

6. Limitation Period for Service Tax Demand:
The show cause notices dated 21-4-2010 demanded service tax for the period October 2004 to March 2009, which was beyond the one-year limitation period specified in Section 73 (1) of the Finance Act 1994. The tribunal found no evidence of suppression of facts or intent to evade tax, and the appellants' belief that no service tax was payable was reasonable and bona fide. Therefore, the larger period of limitation of five years was inapplicable, making the demand time-barred.

7. Jurisdiction of the Commissioner of Central Excise, Surat:
The tribunal noted that while the Commissioner of Central Excise, Surat, may have jurisdiction to demand tax for services provided outside his jurisdiction after the appellants obtained registration in 2007, the tax demand was not sustainable on merits and limitation. Thus, the issue of jurisdiction was of academic importance, and no conclusive finding was given.

Conclusion:
The tribunal set aside the impugned orders, concluding that the appellants were not liable to pay service tax under the categories mentioned, and the demands were time-barred. The appeals were allowed with consequential reliefs in accordance with the law.