2009 (12) TMI 461 - AT - Service Tax

Commercial or Industrial Construction Service - the appellants were required to construct an Onshore Terminal for the purpose of receiving, processing/purification and distribution of natural gas extracted from the Godavari Basin. The gas extracted would be brought through pipelines to OT at Gadimoga for necessary processing and onward transportation to the customers. Demand was made. Held that - transport terminal constructed by assessee for R Ltd. To store, purify and process extracted gas could not be held to be public goods. Therefore, impugned activity was exigible to service tax under category of Commercial or Industrial Construction Service .

Summary

Issues:
- Whether the Onshore Terminal constructed by the appellant falls under the definition of "Commercial or Industrial Construction Service"?
- Whether the demand raised by the Commissioner is barred by limitation?
- Whether the Commissioner had jurisdiction to demand tax on services rendered in Kakinada?

Analysis:

1. Issue 1 - Classification of Onshore Terminal:
The case involved determining whether the Onshore Terminal constructed by the appellant qualified as "Commercial or Industrial Construction Service" (CICS). The appellant argued that the terminal did not fall under the exclusion criteria of CICS, citing the principle of "ejusdem generis." However, the Tribunal disagreed, stating that the terminal was not a public utility like roads, airports, railways, etc., provided by the government. The Tribunal held that the terminal was not covered by the exclusion and was exigible to tax under CICS.

2. Issue 2 - Limitation on Demand:
The appellant contended that the demand raised was barred by limitation since the department was aware of the activity well before the issuance of the show-cause notice. However, the Tribunal found that the appellant had prior knowledge of the taxable nature of the activity, as evidenced by internal correspondence and emails discussing the liability for service tax. The plea of limitation was not established during the hearing, and detailed arguments were deemed necessary to support this claim.

3. Issue 3 - Jurisdiction of the Commissioner:
The appellant challenged the jurisdiction of the Commissioner, arguing that the demand for tax on services rendered in Kakinada fell outside the jurisdiction of the Hyderabad-II Commissionerate. The Tribunal noted that the Regional Office of the appellant in Hyderabad was registered with the adjudicating authority, giving the Commissioner jurisdiction to pass the impugned order. However, the Tribunal acknowledged that further arguments were required from both sides to make a final decision on this jurisdictional dispute.

4. Decision on Pre-deposit:
The Tribunal ordered the appellant to make a pre-deposit of Rs. six crores within four weeks, as the appellant did not demonstrate financial hardship to qualify for a complete waiver. Upon compliance with the pre-deposit, the Tribunal granted a waiver of the balance dues adjudged against the appellant and stayed the recovery pending the final decision in the appeal.

In conclusion, the Tribunal upheld the demand for service tax on the construction of the Onshore Terminal, deferred the decision on the limitation issue pending detailed arguments, and recognized the jurisdiction of the Commissioner subject to further debate. The appellant was directed to make a partial pre-deposit to qualify for a waiver of the remaining dues.