2013 (11) TMI 42 - AT - Service Tax

Stay application - Penalty u/s 78 - services namely, Technical Testing and Analysis Service, Investigation Charges and Transportation Charges/Report and Document Charges etc. rendered in the context of road-construction by Government Agencies and service of road-construction - Exemption from service tax - Scope of Circular No.80/10/04-ST dated 17.09.2004 and Circular F.No. B-I/6/2005-TRU dated 27.07.2005. - Held that - It is evident from perusal of para 13.13.4 of the Circular dated 17.09.2004 that the definition of construction service specifically excludes construction of roads, airports, railways, transport terminals, bridges, tunnels under long distance pipelines, dams etc. In so far as the liability to pay service tax on Business Support Service is concerned, it is amply clear from the Contract entered into between the Applicant and the third party that the Applicant were appointed as service-provider for maintenance of the building and for providing alleged services. Prima facie, the classification of the said services under the category of Business Support Service does not appear to be correct. We find that in this case, service tax has been demanded on the basis of income during the relevant period on account of various heads in the balance sheet. From the proceedings before the lower authorities, it is not clear as to whether the services were provided as part of construction of road being not examined. The individual contracts quoted by the ld. Consultant have also not been analyzed and the same will be examined during the final hearing. In these circumstances, we are of the view that the Applicant could able to make out a prima facie case for full waiver of predeposit of the dues adjudged and its recovery stayed during the pendency of the Appeal - Stay granted.

Summary

Issues:
- Application for waiver of pre-deposit of demand of Rs.52,36,222/- along with interest and penalty under Sections 78 and 77 of the Act.
- Demand of service tax based on Profit and Loss Account for financial years 2006-07 and 2007-08.
- Services provided to the Government of Sikkim for road construction.
- Exemption from service tax for services related to road construction.
- Classification of services under Business Support Service.
- Prima facie case for waiver of pre-deposit and stay of recovery during appeal.

Analysis:

The Applicant filed an Application seeking waiver of pre-deposit of demand amounting to Rs.52,36,222/- along with interest and penalties under Sections 78 and 77 of the Act. The services for which service tax was demanded were Technical Testing and Analysis Service, Investigation Service, and Transportation Charges/Report and Document Charges, provided to the Government of Sikkim for road construction. The Applicant argued that services related to road construction were exempt from service tax, citing Circulars dated 17.09.2004 and 27.07.2005. They also contended that Business Support Service should not be taxed based on their agreement with a third party for building maintenance. The Tribunal noted that the lower authorities did not examine whether the services were part of road construction and individual contracts were not analyzed. Considering these factors, the Tribunal found that the Applicant made a prima facie case for full waiver of pre-deposit of dues adjudged, and recovery was stayed during the pendency of the Appeal.

In the detailed analysis, the Tribunal highlighted the exemption of construction services for roads, airports, railways, and other infrastructure projects from service tax. The Applicant's argument regarding the nature of services provided in the context of road construction and the classification under Business Support Service was considered. The Tribunal emphasized the need for a thorough examination of the contracts and services provided, indicating that such analysis would be conducted during the final hearing. Ultimately, the Tribunal granted the Applicant's Stay Petition, allowing for the waiver of pre-deposit and staying the recovery of the demanded amount during the appeal process.