2018 (3) TMI 507 - AT - Service Tax

Liability of service tax - works contract - strengthening/replacing/realigning the security fence in the Indo-Pakistan International Border; repair and maintenance of roads inside Thermal Power Station, Suratgarh; Construction of residential accommodation for Rajasthan State Police; certain other misc. work like False ceiling in the conference rooms of military station headquarters - Held that - such construction of residential accommodation for own use is not liable to be taxed - Tribunal in Khurana Engineering Ltd. 2010 (11) TMI 81 - CESTAT, AHMEDABAD held that construction of employees quarters for Income Tax Department though done through CPWD and carried out by the appellant contractor cannot be taxed as construction of residential complex. The same are for use by the Income Tax Department for their staff. Present construction of residential accommodation for use by the Police Department for their personnel is excluded from the taxable activities under construction of complex service - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Service tax liability on activities related to strengthening/replacing/realigning security fencing in the international border.
2. Service tax liability on repair and maintenance of roads inside Thermal Power Station.
3. Service tax liability on construction of residential accommodation for Rajasthan State Police.
4. Service tax liability on construction of false ceiling in the conference room of military station headquarters.
5. Miscellaneous tax liabilities confirmed by the original authority.

Analysis:

1. Service tax liability on activities related to strengthening/replacing/realigning security fencing in the international border:
The dispute revolved around the classification of services rendered by the appellants in strengthening the security fence along the Indo-Pakistan International Border. The original authority classified the services under management/ maintenance or repair service, confirming the service tax liability. However, the Tribunal noted that the services were of a non-commercial nature and excluded from works contract service. The Tribunal held that the service tax liability on the replacement/strengthening of the wire fence could not be sustained under any tax category due to the non-commercial nature of the activity.

2. Service tax liability on repair and maintenance of roads inside Thermal Power Station:
The service tax liability was confirmed based on the ground that the road was not a public road. However, the Tribunal, following a previous case law, held that when construction is carried out through a single contract, the road work cannot be taxed separately as two distinct activities. The construction of the road within the thermal power station complex, along with other structures, did not attract service tax liability according to the Tribunal's interpretation.

3. Service tax liability on construction of residential accommodation for Rajasthan State Police:
The original authority confirmed the service tax liability on the construction of residential accommodation for the Rajasthan State Police. However, the Tribunal cited precedent where similar constructions for government departments were held to be excluded from taxable activities under construction of complex service. The construction of residential accommodation for the police department, for their personnel's use, was deemed non-taxable.

4. Service tax liability on construction of false ceiling in the conference room of military station headquarters:
A small amount of service tax was confirmed for the construction of a false ceiling in the conference room of a military station headquarters. The Tribunal noted that the structure was non-commercial, and works contracts for such non-commercial buildings were excluded from service tax. Therefore, the service tax liability for this activity was not upheld.

5. Miscellaneous tax liabilities:
The original authority confirmed additional tax liabilities, which the appellants did not contest in the present appeal. The appellants claimed to have paid the service tax after availing the cum-tax benefit or abatement. The Tribunal suggested that the jurisdictional authorities could verify the correctness of these payments. As the appellants did not contest these liabilities in the appeal, the Tribunal did not address them specifically.

In conclusion, the Tribunal set aside the impugned order on the contested tax liabilities, allowing the appeals in favor of the appellants.