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2024 (1) TMI 582 - AT - Service TaxLevy of Service Tax - Works Contract Service - construction of EWS quarters by the appellant - Residential Complex Service - construction of railway platform and laying of railway track to ply toy train by the appellant for an amusement park - Onus to prove on appellant (shifting burden) - construction of drain (Nallah) by the appellant - abatement is available under N/N. 01/2006-ST dated 01.03.2006 - composite rate under Work Contract Services - Extended period of limitation. Whether the construction of EWS quarters by the appellant is covered under definition of Residential Complex Service , are liable to Service Tax under Works Contract Service? - HELD THAT - The services were not commercial nor for industrial purposes but for discharge of the sovereign function of the said government. Hence the impugned Works Contract Service/Construction of Residential Complex Service is not liable to tax - the decision relied upon by the department in the case of M/S MODI MODI CONSTRUCTIONS VERSUS COMMISSIONER OF CUSTOMS, CENTRAL EXCISE SERVICE TAX, HYDERABAD - II 2019 (10) TMI 171 - CESTAT HYDERABAD is held not applicable to the facts of the present case because in the said case an approach called Nilgiri Homes was being constructed by the service provider having all common facilities within the complex. Resultantly, it was held to be clarified as a residential complex. Similar is the fact for the case Isha Homes (I) Pvt. Ltd. Both these cases have different facts from the present one hence is distinguishable. This issue therefore decided in favour of the appellant s against the department. Whether the construction of railway platform and laying of railway track to ply toy train by the appellant for an amusement park is liable to service tax under Works Contract Service under Section 65(105) (zzzza) or excluded from its scope? - Onus to prove on appellant - HELD THAT - The exclusion clause cannot be made applicable for the toy train installed in an amusement park for the public. Hence have no reason to differ from these findings of the adjudicating authority. The amusement park and any activity therein for the public cannot be called as sovereign function. Resultantly, onus was on the appellant-assessee to prove that this activity of the government was not for commerce but there is no such evidence produced on record. Resultantly, the findings upheld under this issue that the impugned activity was a taxable Works Contract Service. Whether the construction of drain (Nallah) by the appellant is liable to service tax under Works Contract Service under Section 65(105) (zzzza) or excluded from its scope? - HELD THAT - The services of constructing of drain system has been provided by the appellant to the State of Rajasthan under a government scheme called Jawaharlal Nehru National Urban Renewal Mission (JNNURM). The clause has already been referred under issue no. 2. Perusal makes it abundantly clear that the provision does not excluded construction of drain/nallah/sewerage system. However subsequent Notification No. 25/2012-ST dated 20.06.2012 exempts civil structure or any other regional work pertaining to scheme under Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and Rajiv Aawas Yojna. The original authority has denied the benefit of this notification on the ground that the appellant was awarded the contract of construction of drain by UIT vide work order dated 16.08.2008 and 20.12.2010. The work was undertaken in the year 2009-10, 2010-11 and 2011-12 i.e. prior the issuance of the Notification No. 25/2012. Hence this activity is denied to be an exempted activity. In light of the above observations about no mention of drains in (65) (105) (zzzza), there are no reason to differ from the findings in Order-in-Original/Order under challenge. If tax is payable, whether abatement is available under Notification No. 01/2006-ST dated 01.03.2006 and service tax can be paid at composite rate under Work Contract Services? - HELD THAT - The appellant would have been held entitled for the benefit of composition scheme. However, the appellant cannot gain both the benefits i.e. of abatement as well as of composition for rendering Works Contrat Service. Since appellant is held entitled for abatement of 60% of tax amount on the amount received for rendering the Work Contract Services, composition scheme cannot simultaneously been applied. However, issue stands decided in favour of the appellant holding him entitled for the abatement in terms of Notification No 01/2006 dated 01.03.2006. Invocation of Extended period of limitation - onus on the department to produce evidence to prove a positive act - HELD THAT - The non-payment of service tax is not intentional. The appellant had not even got himself registered due to the said bona fide belief. In light of the said belief the onus was of the department to produce evidence to prove a positive act on the part of the appellant that the evasion of duty was intentional or mala fide, but there is no such evidence - the present can be a case nothing more than that of negligence on the part of the appellant, extended period should not have been invoked by the department. The demand raised for providing Works Contract Service for laying the railway tracks and for constructing a drain is confirmed but for the normal period with the benefit of abatement at the rate of 67% in terms of Notification No. 01/2006. The demand under Construction of Residential Complex Service is also hereby set aside. The entire demand for the extended period is hereby set aside - Appeal allowed in part.
Issues Involved:
1. Taxability of construction of EWS quarters under "Residential Complex Service". 2. Taxability of construction of railway platform and laying of railway track for a toy train under "Works Contract Service". 3. Taxability of construction of drain (nallah) under "Works Contract Service". 4. Availability of abatement under Notification No. 01/2006-ST and payment of service tax at composite rate under Work Contract Services. Summary: Issue No. 1: Taxability of Construction of EWS Quarters The Tribunal examined whether the construction of EWS quarters by the appellant fell under the definition of "Residential Complex Service" and was liable for service tax under Works Contract Service. The Tribunal referred to Section 65 (91a) of the Finance Act and noted that the definition requires more than 12 residential units with common areas and facilities. It was found that the constructed houses did not meet these criteria as there was no evidence of common facilities. The service was provided under a welfare scheme by the Government of Rajasthan, not for commercial purposes. Therefore, the Tribunal held that the construction of EWS quarters was not liable to tax as "Residential Complex Service". Issue No. 2: Taxability of Construction of Railway Platform and Laying of Railway Track The Tribunal agreed with the adjudicating authority that the activity of constructing a platform and laying a railway track for a toy train constituted a Works Contract Service. The exclusion clause in Section 65 (105) (zzzza) of the Finance Act, which exempts certain works contracts, was not applicable as the railway track was for an amusement park, not for transportation of goods or passengers. The Tribunal upheld the taxability of this service under Works Contract Service. Issue No. 3: Taxability of Construction of Drain (Nallah) The construction of the drain system was also deemed a Works Contract Service. The service was provided under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM). However, the exemption under Notification No. 25/2012-ST dated 20.06.2012 was not applicable as the work was undertaken before the notification's issuance. The Tribunal upheld the taxability of this service but noted that the construction of drains was not explicitly excluded under Section 65 (105) (zzzza). Issue No. 4: Availability of Abatement and Composite Rate The original adjudicating authority denied the benefit of abatement under Notification No. 01/2006 and the composition scheme under Notification No. 32/2007-ST. The Tribunal observed that the appellant did not claim Cenvat credit and had not availed the benefit of Notification No. 12/2003. Therefore, the appellant was entitled to the abatement of 67% under Notification No. 01/2006. However, the appellant could not simultaneously avail the benefits of both abatement and composition scheme. The Tribunal allowed the abatement but denied the composition scheme benefit. Extended Period and Penalty The Tribunal found that the non-payment of service tax was due to a bona fide belief and not intentional evasion. Therefore, the extended period for demand was not justified, and penalties under Sections 76 and 78 were not imposable. Conclusion The Tribunal set aside the entire demand for the extended period and confirmed the demand for Works Contract Service for laying railway tracks and constructing drains for the normal period with the benefit of abatement at 67%. The demand under Construction of Residential Complex Service was also set aside. The order was modified accordingly, and the appeal was partly allowed.
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