2024 (3) TMI 286 - AT - Service Tax

Classification of services - Commercial Construction or Works Contract Services or not - activity of construction of roads for the period 1.07.2012 to 2013 14 - availability of exemption on construction of roads under notification no. 25/2012-ST - Extended period of limitation - Penalty - interest on delayed payment of service tax - HELD THAT - The construction of roads is covered more specifically under Section 65(25b) defining commercial or industrial construction service and section 65(105)(zzzza) defining Works Contract Service , however, the same excludes the levy of service tax on construction of roads - N/N. 25/2012-ST dated 20.06.2013 w.e.f. 01.07.2012 granted exemption on services, provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of road, bridge, tunnel, or terminal for road transportation for use by general public. By virtue of the said notification the exemption on payment of service tax in respect of services relating to the construction of roads was limited only in respect of those roads which were meant to be used by general public. In other words the utility of the roads was linked with general public. The very clause of the exemption notification when it uses the words road, bridge, tunnel or terminal for road transportation implies the common services to be used by the general public and cannot be restricted which is constructed for development of any township or residential complexes by a builder/developer/coloniser for the utility of the occupants therein. There are no doubt on the intent and the scope of the notification exempting the construction of roads for use by general public and as per the Rules of interpretation the exemption notification has to be construed strictly. Considering the activity of construction of roads by the appellant for the development of the township/residential complexes on behalf of the builders/ developers is specifically meant for the buyers of the plots/residential/commercial complexes and the same cannot be termed for the use of the general public in the sense it has been provided in the notification. Hence the appellant is not entitle to claim exemption from levy of service tax under the notification. Appellant had rendered all the services of construction with material, though in some case they issued separate bills for labour charges and raw material for the same work and charged VAT in the bills of raw material. Therefore, the services executed being works contract were rightly classified under the category of Work Contract Services , as defined under Section 65(105) (zzzza) of the Act. Extended period of limitation - penalty u/s 77 and 78 - HELD THAT - The appellant did not assess the correct amount of service tax and did not reflect the same in ST-3 Returns and hence violated the provisions of the Act. The non-disclosure of these facts would have gone unnoticed, if the same were not unearth by the department at the time of Audit. The adjudicating authority had rightly observed that the appellant wilfully suppressed the facts with intent to evade payment of service tax and therefore the invocation of the extended period of limitation and imposition of penalty is justified. Thus, no interference is called for in the present case invoking the extended period of limitation and imposing penalty under section 77 and 78 of the Act. Interest on delayed payment of service tax - HELD THAT - The imposition of interest on delayed payment of service tax is of mandatory nature and consequently , the liability to pay interest has been correctly imposed on the appellant. From the chart given in the order the adjudicating authority agreed upon that the service tax returns were filed after the due date and hence the liability to pay late fee under section 70 read with rule 7C of the Service Tax Rules, 1994 is upheld. There are no reason to interfere with the impugned order - appeal dismissed.

Summary

Issues Involved:
1. Treatment of colony with boundary walls as a complex.
2. Construction of roads inside colonies for private use.
3. Denial of exemption under Notification No. 25/2012-ST for roads not used by the general public.
4. Non-acceptance of the submission that roads are to be surrendered to local authorities.
5. Misinterpretation of the Madhya Pradesh Corporation Act, 1954.
6. Non-recognition of judicial precedents regarding taxability of road construction.
7. Lack of specific service tax category in the show cause notice.

Summary:

1. Treatment of Colony with Boundary Walls as a Complex:
The adjudicating authority treated any colony with boundary walls as a complex, making construction activities within such colonies taxable under the Finance Act.

2. Construction of Roads Inside Colonies for Private Use:
The authority held that roads constructed inside colonies are for private use by the colony's occupants and not for the general public. Thus, these roads do not qualify for exemption under Notification No. 25/2012-ST.

3. Denial of Exemption Under Notification No. 25/2012-ST:
The appellant's claim for exemption from service tax under Notification No. 25/2012-ST was denied. The notification exempts construction of roads for general public use, but the roads constructed by the appellant were for private use within residential complexes, not for the general public.

4. Non-Acceptance of Submission Regarding Surrender to Local Authorities:
The argument that roads would be surrendered to local authorities and hence should be considered public roads was rejected. The adjudicating authority noted that even after surrender, maintenance responsibility remained with the colonizer, indicating these roads were private.

5. Misinterpretation of the Madhya Pradesh Corporation Act, 1954:
The authority did not accept the appellant's interpretation of the Madhya Pradesh Corporation Act, 1954, regarding the responsibilities of Municipal Corporations over roads, sewers, and drainage systems.

6. Non-Recognition of Judicial Precedents:
The appellant cited the case of Alokik Township Corporation vs. Commissioner of Central Excise and Service Tax, Jaipur-I, but the authority distinguished it based on the period involved. The cited case was for a period before the exemption notification, whereas the current case pertained to a period after the notification was issued.

7. Lack of Specific Service Tax Category in Show Cause Notice:
The show cause notice's lack of a specific service tax category was found baseless. The notice clearly indicated that services fell under "commercial or industrial construction service," "site formation and clearance," and "works contract services."

Extended Period of Limitation and Penalty:
The department's invocation of the extended period of limitation under section 73(1) and the imposition of penalties under sections 77 and 78 were upheld. The appellant's failure to disclose correct service tax liabilities and filing returns late justified these actions.

Interest and Late Fee:
The imposition of interest on delayed service tax payments and late fees for late filing of returns was affirmed as mandatory and correctly imposed.

Conclusion:
The appeal was dismissed, and the impugned order was affirmed, upholding the service tax demand, penalties, and interest imposed on the appellant. The judgment emphasized strict interpretation of exemption notifications and the appellant's duty to disclose accurate tax liabilities.