2018 (9) TMI 1377 - AT - Service Tax

Works Contract Service - construction of water storage tank was for distribution of water to the public - non-payment of service tax - extended period of limitation - Held that - Reliance placed in Tribunal s decision in the case of Larsen & Toubro Ltd. V/s CST, Ahmedabad 2011 (1) TMI 188 - CESTAT, AHMEDABAD , where it was held that laying down that work of pipeline laying for water supply under contract with Gujarat Water Supply and Sewerage Board cannot be held to be primarily for commerce or industry. Taking into consideration the fact that the issue stand decided by the precedent decision of the Tribunal, as also the various certificates issued by the Government Agencies certifying that the construction of water storage tank was for distribution of water to the public, it is held that the said demand is not sustainable - demand set aside - penalty also set aside. Appeal allowed - decided in favor of appellant.

Issues:
1. Confirmation of demand of Service Tax against the appellant for the period 01.06.2007 to 31.03.2012.
2. Imposition of penalties under Section 76, 77, and 78 of the Finance Act.
3. Invocation of longer period of limitation for raising the demand.
4. Classification of the appellant's activities as falling under 'Works Contract Services.'
5. Applicability of Service Tax on construction of water reservoirs for public distribution.

Analysis:

1. The appeal challenged the Commissioner's order confirming the demand of Service Tax amounting to ?1,05,52,420 against the appellant for the period from June 2007 to March 2012. The demand also included interest and penalties under Section 76, 77, and 78 of the Finance Act. The Commissioner based the demand on the appellant providing taxable services categorized as 'Works Contract Services' during the mentioned period without paying the Service Tax, invoking the longer period of limitation.

2. The appellant had undertaken contracts for constructing RCC overhead water storage tanks and sewer work in various districts for government and civic authorities. The primary purpose of these water storage tanks was to supply drinking water constantly in the respective areas. The Revenue contended that these activities fell under works contract services, leading to the demand being confirmed by the lower authorities.

3. The appellants argued that their activities were not for commerce or industry but for constructing water reservoirs essential for distributing water to the public. They relied on precedents like Larsen & Toubro Ltd. V/s CST, Ahmedabad and Nagarjuna Construction Co. LTD. V/s Commissioner of Central Excise, Hyderabad to support their stance that such construction activities should not attract service tax.

4. The appellant highlighted that similar show cause notices for subsequent periods were confirmed by the Original Adjudicating Authority, but were later overturned by the Commissioner (Appeals) based on Tribunal decisions and set aside confirmations. The Revenue conceded that the Commissioner (Appeals) had ruled in favor of the assessee in identical issues, considering the Tribunal's precedent decisions and certificates from Government Agencies certifying the construction of water storage tanks for public water distribution.

5. Ultimately, the Tribunal found the demand unsustainable, setting it aside along with the penalties imposed. The appeal was allowed, granting consequential relief to the appellant based on the facts presented and the legal precedents cited, leading to the dismissal of the demand for Service Tax and associated penalties.

This detailed analysis of the judgment illustrates the legal arguments, factual background, and the Tribunal's decision on each issue involved in the case.

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