2014 (10) TMI 97 - AT - Service Tax

Works contracts - turnkey projects - change in classification - service provider paid service tax prior to 01.06.2007 for the taxable service, namely, erection, commissioning or installation service - Held that - Where projects were started after 01.06.2007, in respect of these projects at least, in our opinion, prima facie the decision of the Tribunal in the case of Ramky Infrastructure (2012 (6) TMI 165 - CESTAT, Bangalore) may be applicable. Even though we are required to go into much more detailed submissions, records and statutory provisions etc., we consider that the learned counsel was fair in submitting that the amount of more than ₹ 3.22 crores deposited by them would be sufficient to discharge the entire service tax liability arising for the period up to September 2009 in respect of all these projects. However he was not able to produce a worksheet to support this claim. Since considerable time was spent in hearing the matter, it was felt that it may not be worthwhile adjourning the matter only for this purpose and therefore if the appellants are required to deposit some additional amount, that can be considered as sufficient for pre-deposit to hear the matter. - Conditional stay granted.

Summary

Issues Involved:
Service tax demand on turnkey projects under works contract definition; Exemption notification benefit; Bona fide belief of the appellant; Pre-deposit requirement for service tax liability; Applicability of Tribunal decision on projects started after 01.06.2007; Deposit amount for power generation project; Compliance and stay against recovery.

Detailed Analysis:

1. Service Tax Demand on Turnkey Projects:
The appellant was demanded service tax for the period from 01.06.2007 to 31.03.2012 on the basis that turnkey projects fall within the definition of 'Works Contract' as per Section 65(105) (zzzza) of Finance Act 1994. The demand amounted to more than Rs. 46.73 crores with interest and penalties imposed under Sections 77 & 78 of the Finance Act 1994. Reference was made to a previous Tribunal decision in a similar case.

2. Exemption Notification Benefit and Bona Fide Belief:
The appellant argued that for projects started after October 2009, where an exemption was granted for work related to canals, no duty should be demanded. However, for the period before October 2009, the appellant claimed to have a bona fide belief as they had been paying service tax even before 01.06.2007. The appellant's belief was supported by circulars from the Board, indicating that they were entitled to continue their practice.

3. Pre-deposit Requirement and Tribunal Decision Applicability:
For projects started after 01.06.2007, the Tribunal considered the deposit made by the appellant to be sufficient to cover the service tax liability up to September 2009. However, the appellant was directed to deposit an additional amount to ensure compliance. The Tribunal also noted that the decision in the Ramky Infrastructure case might be applicable to these projects.

4. Power Generation Project and Compliance:
One project related to a power generation project, for which the appellant relied on a specific case law. The Tribunal directed the appellant to deposit a specified amount within a given timeframe and report compliance. The pre-deposit requirement for the balance dues was waived, and a stay against recovery was granted for 180 days.

In conclusion, the judgment addressed the various issues related to service tax demands on turnkey projects, exemption notifications, appellant's bona fide belief, pre-deposit requirements, applicability of Tribunal decisions, and compliance measures for specific projects. The detailed analysis provided insights into the legal reasoning and considerations taken into account by the Tribunal in reaching its decision.