2016 (10) TMI 743 - AT - Service Tax

Construction services provided to NTPC - Commercial or Industrial Construction Service - whether services provided to NTPC is for social or philanthropic purposes and the demand of service tax is not justified? - the decision in the case of P.B. Rathod Vs. CCE, Nashik 2015 (10) TMI 1854 - CESTAT MUMBAI referred - Held that - the decision in the case is not applicable as service were provided to a Government of Gujarat Water Supply and Sewerage Board and Construction of Sports Complex Stadium, allowed to be used by public. Therefore the services were provided not for commercial or industrial uses. M/s NTPC Ltd. is a Public Ltd. Company and indeed engaged in the industrial and commercial activities i.e. generation of power and selling thereof. Therefore the laying of pipeline even for providing to water supply to staff quarter is not for social or philanthropic purposes. The staff quarter and welfare of the employee is part of the statutory obligation of M/s NTPC Ltd. for ultimate object of running the commercial and industrial organisation. Therefore the service provided by the appellant is for use in the activity of commercial or industrial activity - service provided by the appellant to the respondent M/s NTPC Ltd. clearly falls under the category of Commercial or Industrial Construction Service - service Tax leviable. Period of limitation - Held that - the appellant never informed the department about their activity, even did not bother to take any opinion either from department or from any legal professional. Since, the department was not aware about activity of the appellant, therefore the extended period was rightly invoked. Imposition of penalty - Held that - the appellant recorded the transaction in the books of account, therefore there is no malafide intention on their part which shows reasonable cause for non-payment of Service Tax. There is a reasonable cause shown by the appellant for non-payment of Service Tax in respect of service provided to M/s NTPC Ltd - Section 80invoked - penalty imposed u/s 76, 77 & 78 of the FA, 1994 waived. Appeal disposed off - partly decided in favor of appellant.

Summary

Issues:
Interpretation of Commercial or Industrial Construction Service; Extended period of demand; Suppression of facts; Imposition of penalties; Applicability of judgments in similar cases.

Interpretation of Commercial or Industrial Construction Service:
The appeal challenged an Order-in-Original regarding the demand of Service Tax on construction services provided to different entities. The appellant argued that laying pipelines for water supply to NTPC was not for commercial or industrial purposes but for welfare. They cited judgments to support their stance. The Revenue contended that NTPC, being a commercial entity, necessitated the service falling under Commercial or Industrial Construction Service. The Tribunal ruled in favor of the Revenue, stating that even services for staff welfare in commercial organizations are part of statutory obligations for running the industry, hence falling under the said category. The Tribunal distinguished previous judgments where services were not for commercial or industrial use, unlike in the present case. The service provided to NTPC was deemed liable for Service Tax.

Extended period of demand and Suppression of facts:
The appellant argued that the demand was raised for an extended period without any suppression of facts, as the issue revolved around the interpretation of law. They claimed that the non-payment of Service Tax was due to a genuine belief that their service did not fall under Commercial or Industrial Construction Service. The Tribunal, however, noted that the appellant did not inform the department about their activity, leading to the rightful invocation of the extended period. Despite this, the Tribunal waived the penalties imposed under various sections of the Finance Act, 1994, citing the appellant's reasonable cause for non-payment of Service Tax to NTPC.

Applicability of judgments in similar cases:
The Tribunal analyzed the judgments cited by the appellant, highlighting that those cases involved services provided to entities not engaged in commercial or industrial activities. In contrast, the service in question was provided to NTPC, a commercial organization, making the cited judgments inapplicable. The Tribunal emphasized that the service recipient being a commercial entity was a crucial factor in determining the applicability of Commercial or Industrial Construction Service, leading to a ruling in favor of the Revenue.

In conclusion, the Tribunal upheld the demand of Service Tax on the construction services provided to NTPC, considering it fell under Commercial or Industrial Construction Service due to the nature of the recipient's activities. The Tribunal also addressed the issue of the extended period of demand, suppression of facts, and the applicability of previous judgments, ultimately waiving penalties due to the appellant's reasonable cause for non-payment of Service Tax.