2022 (9) TMI 853 - AT - Service Tax

Exemption from service tax provided to DMRC - Railways - composite contacts - works contract service - erection, commissioning and installation service - supply of tangible goods service - execution of contracts for laying of water pipelines - doctrine of noscitur a sociis and of ejusdem generis - relied upon documents - rectification of mistake apparent in the record under section 35C of Central Excise Act, 1944, as made applicable to Finance Act, 1994 - HELD THAT - It is found that the allegations against the respondent herein for fastening the tax liability rests upon the allegation that erection commissioning or installation service has been rendered. The said service was, along with others, included within the scope of work contract service upon incorporation in Section 65 (105) of Finance Act, 1994 with effect from 1st June 2007 and it has been held by the Hon ble Supreme Court in M/s Larsen Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT that the distinction between the separate enumerations and the composite enumeration within works contract service lies on the absence of supply of material insofar as the former is concerned. It is seen from the sample contracts that respondent herein was also responsible for supply of material on which tax has been claimed to have been discharged; in the absence of any controverting of this submission, or contrary evidence, the taxable service within which the respondent was sought to be fitted would not apply. On examination of fitment within the claimed enumeration of works contract service , it is found that the respondent was involved in the shifting of the existing water pipelines belonging to Delhi Jal Board which, by implication, ultimately is rendering of services to that agency which the grounds of appeal admits to being eligible for exclusion from tax. In terms of the decision of the Hon ble High Court of Madras in M/s Indian Hume Pipes Co Ltd, 2015 (9) TMI 479 - MADRAS HIGH COURT the laying of pipelines as an adjunct of civil structure would alone bring the activity within the ambit of section 65 (105) (zzd) of Finance Act, 1994 and from the nature of the work undertaken, it is apparent that the activity contracted out by the respondent does not relate to civil work for facilitating the network of Delhi Metro Rail Corporation. The exclusion of the alleged taxable service sought to be fastened on them from any contract other than service simpliciter erases the distinction of commercial outcome suggested by the reviewing authority. In any case, even if Delhi Metro Rail Corporation were to be the final recipient of the service rendered by the respondent, the decision of the Hon ble High Court of Calcutta in M/s Afcons Infrastructure Ltd. categorising them as railway forecloses taxability even if the dispute pertains to laying of water pipelines. Appeal dismissed.

Issues Involved:
1. Taxability of receipts from the Delhi Metro Rail Corporation (DMRC) for laying water pipelines.
2. Classification of services under section 65(105)(zzd) of the Finance Act, 1994.
3. Applicability of exemptions for services rendered to public utilities.
4. Procedural issues related to the submission and examination of contracts.
5. Admissibility and relevance of documents in support of the appeal.

Detailed Analysis:

1. Taxability of Receipts from DMRC:
The primary issue was whether the receipts from DMRC for laying water pipelines were taxable under section 65(105)(zzd) of the Finance Act, 1994. The impugned order concluded that the activity of laying pipelines for conveyance of water or sewerage does not fall under the taxable service of 'erection, commissioning, and installation' or 'commercial construction'. This was based on the clarification from the Central Board of Excise & Customs (CBEC) and judicial pronouncements.

2. Classification of Services:
The adjudicating authority and the Tribunal examined whether the services provided by the respondent fell within the definition of 'erection, commissioning, or installation' under section 65(39a) of the Finance Act, 1994. The Tribunal noted that the services rendered were part of a composite contract involving the supply of materials, which would classify them under 'works contract service' post-1st June 2007, as per the Supreme Court's decision in Commissioner of Central Excise, Kerala versus Larsen & Toubro Ltd.

3. Applicability of Exemptions for Services Rendered to Public Utilities:
The impugned order and subsequent Tribunal findings emphasized that the services provided to Delhi Jal Board (DJB) and DMRC were for public utilities and thus not taxable. The Tribunal referenced the decision in Lanco Infratech Ltd. and the Hon'ble High Court of Madras in Commissioner of Central Excise, Tiruchirappalli versus Indian Hume Pipes Co. Ltd., which supported the exclusion of such services from taxability.

4. Procedural Issues Related to Submission and Examination of Contracts:
The Tribunal noted that the respondent had failed to produce relevant contracts, but the adjudicating authority did not find it necessary to examine each contract exhaustively. The Tribunal highlighted that the show cause notice proposed recovery based on 'best judgment' assessment under section 72 of the Finance Act, 1994, without adverse inference from the lack of contracts. The Hon'ble High Court of Delhi had directed the department to produce necessary documents, which were not adequately provided, leading to procedural delays.

5. Admissibility and Relevance of Documents in Support of the Appeal:
The Tribunal found that the appeal memorandum did not rely on specific contracts or their absence for challenging the impugned order. The Tribunal emphasized that introducing new facts or documents not referred to in the show cause notice would amount to a fresh investigation, which is not permissible. The remand order from the Hon'ble High Court of Delhi required the tax authorities to provide necessary documents, which were not sufficiently produced, rendering the plea of the Learned Authorized Representative untenable.

Conclusion:
The Tribunal dismissed the appeal, concluding that the overwhelming factual matrix precluded the taxability proposed in the show cause notices. The Tribunal upheld the impugned order, noting that the services rendered to DJB and DMRC were not taxable under the specified sections of the Finance Act, 1994. The procedural lapses and lack of necessary documents further weakened the appellant-Commissioner's case. The appeal was dismissed, with the order pronounced in open court on 15/09/2022.

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