2016 (7) TMI 304 - AT - Service Tax

Demand of service on Civil Work, Infrastructure Charges paid to TNEB - Denial of cenvat credit - erection and installation of the work of electricity generation system which is a composite contract involving the installation of generator as well as execution of Civil Work carried out by the appellant. - Held that - Erection service provided was purely a Works Contract Service since that involved Civil Works as well as Electrical Works. Such works carried out before 01.06.2007 shall not be taxable . So far as Erection Charges is concerned, pertaining to the period 01.04.2008 to 33.03.2009, it may be stated that, that shall be liable to tax and what that is done by the learned adjudicating authority is proper. The Infrastructure Charges paid to TNEB and incurred by the appellant directly as well as reimbursed to it, is not in relation to any services provided by the appellant to its clients. Therefore, in the absence of any taxing entry to tax such receipts the appellant is not liable to service tax thereon. The Cenvat credit denied pertains to the input credit taken by the appellant for use thereof in manufacture of the generators. The generator not being liable to duty by virtue of exemption, appellant is liable to pay back entire credit taken to the State with interest. It is made clear that utilisation of the credit shall be calculated from the date of utilisation thereof and interest, if any, payable shall be calculated from that date till the period that was paid back to State. Accordingly appellant is liable to penalty. However considering the facts and circumstances of the case, to reduce the dispute, it would be proper to direct the appellant to deposit 25% of the demand of duty on this count of ineligible credit issue pertaining to the period 01.10.2006 to 31.03.2008. Decided partly in favor of assessee.

Summary

Issues:
1. Taxation of civil work involving erection and commissioning of wind operated electricity generator.
2. Taxability of erection charges.
3. Taxation of license fee paid for infrastructure development.
4. Taxation of land development charges.
5. Denial of Cenvat credit.

Analysis:
1. The dispute regarding civil work involving erection and commissioning of the wind operated electricity generator was analyzed. The appellant argued that the works contract involving civil work and installation of the generator should not be taxed for the period before 01.06.2007, following legal precedent. The tribunal agreed that no tax demand for this period should be sustained based on the legal position.

2. The taxability of erection charges for a specific period was discussed. The appellant acknowledged the taxable nature of erection charges and agreed to pay any deficiency if found by the department. The tribunal deemed the tax liability on erection charges for the relevant period appropriate, subject to verification by the Revenue.

3. The taxation of license fee paid to TNEB for infrastructure development was disputed. The appellant contended that since the fee was not related to any services provided, it should not be taxable under the Finance Act, 1994. The tribunal concurred that such charges were not subject to taxation as they were not connected to any taxable services.

4. The issue of taxing land development charges was examined. The appellant clarified that the transactions involving land development charges were governed by the Transfer of Property Act and not the Finance Act, 1994. The tribunal agreed that these charges did not fall under the scope of taxation as they did not involve the provision of any services.

5. The denial of Cenvat credit was reviewed. The appellant had utilized the credit on inputs used in manufacturing duty-free goods, leading to a dispute with the Revenue. The tribunal held that the appellant was liable to pay back the entire credit taken with interest, following a specific judgment. A penalty was imposed on the appellant for the misuse of Cenvat credit, with a direction to deposit a portion of the demand.

6. The tribunal partially allowed the appeal and remanded the case on the issue of ineligible Cenvat credit. It directed the adjudicating authority to carry out the consequences of the order promptly and resolve any remaining disputes within a specified timeframe. The judgment provided a detailed analysis of each issue raised and concluded with specific directions for further action.