2009 (8) TMI 301 - AT - Service Tax

Stay/Dispensation of pre-deposit invoking of extended period The Appellant was engaged in the activity of lowering, lying, jointing and testing GRP pipes at the customer site, during the material period. . The case of the appellant is that as GIDC is not a profit-making institution, the service rendered to them would not come within the ambit of the Commercial or Industrial Construction Service . In this case Tri-Mumbai-held that a blind belief is not be treated as bona fide belief. In this connection, support is claimed from the decision in Tanzeem Screenarts v. Commissioner of Central Excise, Mumbai-I, 2006 (196) E.L.T. 209 (Tri.-Mumbai). It appears, the fact that huge amounts were collected from GIDC as consideration for service which was rendered to them in the same manner as to private agencies was suppressed in the service tax returns. That the Tribunal direct the appellants to pre-deposit an amount of Rs.50.00 laths (Rupees Fifty lakhs only) under Section 35F of the Act (as applicable to service tax appeals) within a period of four weeks and report compliance on 6-10-09. In the event of due compliance, there shall be waiver of pre-deposit in respect of the penalty and the balance amount of service tax.

Summary

Issues:
Waiver of pre-deposit and stay of recovery in respect of service tax amounting to Rs.1,04,77,357/- and equal amount of penalty.

Analysis:

Issue 1: Tax Liability on Service Rendered to GIDC
The dispute revolved around whether the service rendered by the appellants to Gujarat Industrial Development Corporation (GIDC) falls under the definition of "Commercial or Industrial Construction Service" as per Section 65(25b) of the Finance Act, 1994. The Commissioner held that the activity of lowering, laying, jointing, and testing GRP pipes at GIDC premises was taxable under the extended period of limitation due to suppression of material facts by the assessee. The appellants argued that as GIDC is not a profit-making institution, the service should not be taxable. However, the Tribunal found that the service provided to GIDC for industrial purposes falls within the definition of taxable service, distinguishing it from services provided to municipal corporations, which were deemed non-taxable.

Issue 2: Applicability of Precedents
The appellants cited various decisions to support their claim that the service rendered to GIDC should not be taxable. However, the Tribunal differentiated the present case from the precedents cited, emphasizing the industrial character and purpose for which the pipelines were laid at GIDC premises. The Tribunal highlighted that the industrial nature of the service provided to GIDC aligns with the definition of "Commercial or Industrial Construction Service," thereby rejecting the applicability of the cited decisions.

Issue 3: Limitation on Tax Demand
The appellants raised a plea on limitation against the demand of service tax, arguing that they believed the services provided to GIDC were not taxable in good faith. However, the Tribunal noted that the appellants had paid service tax for similar activities undertaken for private customers during the disputed period but did not disclose the amounts collected from GIDC in their service tax returns. This lack of disclosure, coupled with the suppression of material facts, led the Tribunal to uphold the invocation of the extended period of limitation under Section 73(1) of the Act.

Conclusion:
The Tribunal directed the appellants to pre-deposit a specified amount within a given timeframe, failing which the waiver of pre-deposit in respect of the penalty and the balance amount of service tax would not be granted. The judgment emphasized the industrial nature of the services provided to GIDC and the importance of full disclosure in tax matters, ultimately upholding the tax liability on the appellants for the services rendered to GIDC.