2015 (4) TMI 613 - AT - Service Tax

Waiver of pre deposit - Commercial or Industrial Construction Services - Held that- Work undertaken by the Appellants related to Hydro Power Project consisting of various activities.The definition of Commercial or Industrial Construction Service excluded services provided in respect of Dams, Roads, Tunnels. In such a situation, the provisions of section 65A of Finance Act, 1994 requires identification of the services which gives the essential character when different services are provided. What comes out is the fact that all items of work are related to a Dam and a Power Project, Roads, Tunnel etc. and the Dam constitutes the main activity and the Power Project can be entirely different or may not be different. It is difficult to imagine a hydro power project without a dam. Once again, this is also arguable and prima facie view is in favour of appellant since appellant is not treating the contract as a composite contract. - requirement of predeposit has to be waived and stay has to be granted against the recovery of the dues during the pendency of appeal. Accordingly the requirement of predeposit is waived and stay against recovery is granted during the pendency of appeal. - Stay granted.

Summary

Issues:
Interpretation of definition of 'Commercial or Industrial Construction Services' under section 65(25b) of the Finance Act, 1994; Vivisection of a single composite contract into different components for service tax purposes.

Analysis:
The Appellant undertook civil works for Hydro Power Projects under contracts with various activities like construction of roads, tunnels, dams, etc. The Appellant paid service tax only on specific items, believing that construction of tunnels, roads, dams, etc., was excluded from 'Commercial or Industrial Construction Services' as per section 65(25b) of the Finance Act, 1994. The Commissioner held that the essential character of the work was commercial construction, requiring service tax payment on the balance amount claimed as exempt.

The Appellant argued that segregation between different activities in a single contract was allowed, citing a CBEC circular. The Learned AR contended that a single composite contract should be treated as a single service. The Tribunal analyzed the definition of 'Commercial or Industrial Construction Services' under section 65(25b) and the CBEC circular, emphasizing the exclusion of services related to roads, airports, railways, tunnels, and dams. The Tribunal noted that the work related to a Hydro Power Project, including dams, roads, tunnels, etc., with the dam as the main activity. The Tribunal leaned towards the Appellant's view that the contract was not treated as a composite one, warranting a waiver of predeposit and granting a stay against recovery during the appeal.

In conclusion, the Tribunal found in favor of the Appellant, allowing the waiver of predeposit and granting a stay against recovery during the appeal process. The decision was based on the interpretation of the definition of 'Commercial or Industrial Construction Services' and the treatment of a single composite contract for service tax purposes.