2019 (3) TMI 1379 - AT - Service Tax

Commercial and Industrial Construction Service - period from April, 2005 to August, 2007 - demand of service tax - Held that - The construction activity undertaken by the appellant was in the nature of a composite contract and the demand raised therein is also under CICS - This being the case, this issue has been decided in favor of the taxpayer by the Hon ble Apex Court in the case of Commissioner of C. Ex. & Cus., Kerala Vs. Larsen & Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT , where it was held that Works contract were not chargeable to service tax prior to 1.6.2007 - the demand under CICS for the period 04/2005 to 08/2007 cannot sustain. Works Contract service - period from June, 2007 to October, 2007 - demand of service tax - Held that - The work in connection with the construction of water treatment plants undertaken for Kerala Water Authority, cannot be covered under WCS as the same are not for any commercial or industrial purpose - similar issues in this regard have already been decided in the case of Lanco Infratech Ltd. Vs. C.C.E. 2015 (5) TMI 37 - CESTAT BANGALORE (LB) , where demands are set aside - thus, the construction activity was not for the purpose of commerce or industry - demand do not sustain. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Service tax liability for Water Supply/Treatment Project
2. Service tax liability for Hydro Electric Projects
3. Applicability of Works Contract Service (WCS)
4. Applicability of Commercial and Industrial Construction Service (CICS)
5. Interpretation of construction activities for commercial or industrial purpose

Analysis:
1. The assessee was engaged in cross country pipeline business with Oil & Gas Companies and various construction activities. The Internal Audit revealed non-discharge of service tax liability for Water Supply/Treatment Project and Hydro Electric Projects. A Show Cause Notice demanded service tax under WCS and CICS, with interest and penalties. The lower authority confirmed the demand, but the Commissioner of Central Excise (Appeals) allowed the appeal, stating that the construction of Hydro Electric dams for the Kerala State Electricity Board did not qualify as an activity of "Commerce or Industry." The Revenue appealed this decision.

2. During the hearing, the Revenue and the respondent presented their arguments. The Tribunal reviewed the contentions, evidence, and legal references. It was noted that the construction activity was part of a composite contract falling under CICS, a matter previously decided in favor of the taxpayer by the Supreme Court and the Tribunal. Consequently, the demand under CICS for the specified period was deemed unsustainable.

3. Regarding the demand under WCS for the water treatment plants constructed for the Kerala Water Authority, it was determined that such projects did not serve commercial or industrial purposes. This interpretation was supported by previous cases like Lanco Infratech Ltd. Vs. C.C.E. and Nagarjuna Construction Co. Vs. C.C.E. The Tribunal concurred with the argument that the construction activity was not intended for commerce or industry, leading to the dismissal of the Revenue's appeal.

4. The Tribunal upheld the findings of the first appellate authority, concluding that the demand under WCS and CICS could not be sustained due to the nature of the construction activities not aligning with commercial or industrial purposes. As a result, the appeal filed by the Revenue was dismissed. The operative part of the order was pronounced in open court, finalizing the decision.