2024 (4) TMI 327 - AT - Service Tax

Non-payment of service tax - work undertaken for the main contractor - Construction service - Site formation Clearance Excavation and Earth moving and demolition services - Erection Commissioning and Installation Service - CBEC Circular No. 147/16/2011-Service Tax dated 21.10.2011 - HELD THAT - The work undertaken by the appellant for the main contractor namely M/s. KP Buildcom was for construction of boundary wall for Pipavav port within the port area and civil work for erection of tower - It can be seen from N/N. 25/2007-ST dated 22.05.2007 provides that activities pertaining to construction of Port are exempted by the above mentioned exemption notification. Since the construction of boundary wall and tower within the port area are very much part of the port area therefore the provisions of Notification No. 25/2007-ST dated 22.05.2007 will certainly be applicable to the appellant being sub-contractor of the main contractor and therefore appellant shall not be liable to pay any service tax on such activity. As regards to the construction activity undertaken by the appellant for M/s. Dhenu Developers the same was for construction of drainage pipe line for Rajkot Municipal Corporation - Hon ble Supreme Court in its decision in COMMISSIONER VERSUS INDIAN HUME PIPES CO. LTD. 2016 (4) TMI 1465 - SC ORDER has held assessee is engaged in laying of long distance pipelines to enable State Water Supply and Drainage Board to supply water in public interest and to take care of civil amenities. Tribunal order that aforesaid activity is a part of construction activity not commercial in nature and accordingly not covered under erection commissioning or installation service is accordingly agreed with. Assessee not liable to pay Service Tax. Since the activity of construction of drainage pipeline for Municipal Corporation is not for commercial purpose and therefore the construction activity pertaining to construction of drainage pipeline for Rajkot Municipal Corporation is not liable to service tax by virtue of the fact that same is not in the nature of commercial activity and therefore same is also not liable to service tax. The impugned order-in-appeal is without any merit - appeal allowed.

Summary

Issues:
The issues involved in the judgment are:
1. Liability of service tax on services provided by the appellant to main contractors.
2. Applicability of exemption notifications to the construction activities undertaken by the appellant.

Issue 1: Liability of Service Tax
The appellant, engaged in providing taxable services, was found to have not paid service tax on services rendered to main contractors during an audit. The appellant contended that certain activities were exempt from service tax based on specific notifications and circulars. The appellant argued that no service tax liability arises due to the nature of the services provided. The advocate cited relevant case laws to support the appellant's position. The appellant also raised the issue of the show cause notice being time-barred, as all transactions were duly recorded and returns were filed regularly.

Issue 2: Applicability of Exemption Notifications
Regarding the work undertaken for main contractors, it was established that certain activities fell under the scope of exemption notifications. For instance, construction activities related to ports were exempted under Notification No. 25/2007-ST. The Tribunal found that the construction of boundary walls and towers within the port area qualified for this exemption. Similarly, the construction of drainage pipelines for a municipal corporation was deemed non-commercial in nature based on a Supreme Court decision, thus not subject to service tax.

In conclusion, the Tribunal held that the impugned order-in-appeal lacked merit and was set aside, allowing the appeal in favor of the appellant.