2024 (3) TMI 287 - AT - Service Tax

Non-payment of service tax - Laying of pipelines under WCS/CICS - Construction of reservoirs, CNG stations and fire stations etc. - Extended period of Limitation. Work of laying pipelines under the head works contract service done for Gas Authority of India Ltd (as the subcontractor) - HELD THAT - The amount received prior to 01.06.2007 is not taxable. Further, the Appellant is entitled to abatement of 67% from the gross value towards material component. Further, the Appellant has demonstrated that the main contractor has adjusted the amount of service tax from the bill(s) of the Appellant subcontractor. Thus, the Appellant is entitled to set-off of the tax deposited by the main contractor and admittedly adjusted from their bills. Also the Appellant is entitled to pay tax under the composition scheme and the same cannot be denied for having not opted for. Construction of the reservoirs, CNG stations and fire stations - HELD THAT - The activity of construction of fire stations is of non-commercial nature and hence the same is held as exempt. So far the activity of construction of reservoirs and CNG stations is concerned, the demand is bad for the period prior to 01.06.2007. After 01.06.2007, Appellant shall be entitled to abatement of 67% of the gross value and also be entitled to the benefit of paying tax under the composition scheme - also, free supply of material, if any, from the service receiver cannot be added to the gross turnover of the Appellant, as held by the Apex Court in the case of COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. 2018 (2) TMI 1325 - SUPREME COURT . Extended period of limitation - HELD THAT - The Appellant was registered with the department and have been filing the returns regularly and also maintains proper records of the transactions. The issue involved is wholly attributable to interpretation of the tax provisions. Accordingly, the extended period of limitation is not available to revenue. The impugned order set aside - appeal allowed.

Summary

Issues Involved:
The appeal against the demand of service tax under Sec 73 and Sec 73A of the Finance Act, 1994 for the period 2005-06 to 2009-10 under the categories of "Commercial or Industrial Construction service" (CICS), "Works Contract service" (WCS), and "Site Formation and Clearance service".

Commercial or Industrial Construction Service (CICS)/Works Contract:
The Appellant, a works contractor, engaged in laying optical fiber cables and gas pipelines for GAIL, construction of reservoirs, etc., contested the demand of Rs.1,53,48,874 for the period 2005-06 to 2009-10. The denovo order confirmed part of the demand citing various reasons including the liability to pay service tax for laying optical fiber cables, non-exemption of laying water and gas pipelines for commercial purposes, and denial of abatement due to free material supply. The Appellant argued relying on legal precedents and judgments, contesting the demand prior to 01.06.2007 and the denial of abatement.

Optical Fiber Work (Sec 73A):
The demand of Rs.4,39,514 for optical fiber work was confirmed in the denovo order, as the Appellant had collected and deposited the tax. The Appellant did not contest this amount, acknowledging the tax collection and deposit.

Construction of Reservoirs, CNG Stations, and Fire Stations:
The demand of Rs.11,66,538 for construction of reservoirs, CNG stations, and fire stations was contested. The Tribunal held the construction of fire stations as exempt due to its non-commercial nature. For reservoirs and CNG stations, the demand was held invalid before 01.06.2007, with entitlement to abatement and composition scheme post that date.

Liability on Subcontractor Payments:
The Appellant argued against the demand for service tax already paid by subcontractors, emphasizing that the same service cannot be taxed twice. They provided evidence of subcontractor payments and deductions. The Tribunal acknowledged the set-off of tax deposited by the main contractor and upheld the Appellant's entitlement to pay tax under the composition scheme.

Extended Period of Limitation:
The Tribunal noted the Appellant's regular tax filings and proper record maintenance, attributing the issue to interpretation of tax provisions. Consequently, the extended period of limitation was deemed unavailable to the revenue department.

Conclusion:
After considering the contentions and records, the Tribunal allowed the appeal, setting aside the impugned order. The tax liability was directed to be recalculated based on the findings and observations. The decision was pronounced in the open court on 06.03.2024.